Average Auto Loan Interest Rates By Credit Score 2025
Plan for a new or used car, and a question arises in your mind about how average auto loan interest rates by credit score affect your car purchase. No worries, we have got you and will give you detailed information in our article.
Consider consulting the average car loan interest rate information from car buyers to help you. According to Edmunds’ report, the average car loan interest rate for April was 7.1% APR for new cars, and for used cars it was 10.9% APR. A credit score is an important factor in gaining auto loan interest rates, as lenders check how you will repay the loan. The lower your credit score is the higher your interest loan rate.
Average Auto Loan Interest Rates By Credit Score
Lenders give you an interest rate based on several factors such as your credit history, credit score, and income. But some possibilities exist when you get a decent interest rate without having a good credit score. For instance, if someone has a credit score of 730, they typically get an average interest rate of 6.70% on new car loans and 9.63% on used ones. Likewise, a person with a credit score of 550 may receive an interest rate of around 13.00% for a new car and 18.95% for a used vehicle.
You can see how a credit score makes a difference in loan interest rates through our below mentioned table below.
| Personal FICO score | Average interest rate for new car loans | Average interest rate for used car loans |
| 781 to 850 | 4.77% | 7.67% |
| 661 to 780 | 6.40% | 9.95% |
| 601 to 660 | 9.59% | 14.46% |
| 501 to 600 | 13.08% | 19.38% |
| 300 to 500 | 15.75% | 21.81% |
Source: https://www.experian.com/automotive/auto-credit-webinar-form
Average Auto Loan interest rate by state
Auto loan interest rate depends on the state you live in; in Mexico and Georgia, interest rates are above 8 percent. Whereas in Minnesota, for new cars best interest rates are given. 13 interest rate for used cars in Mississippi and Vermont, you will get a lower interest rate, such as 6.68%.
Average Car Loan Rates Over Time
In the past four years, loan interest rates have increased due to the Federal Reserve. To combat high inflation, they raised their federal funds, which in turn increased loan interest rates.
Factors That Affect Auto Loan Interest Rates
Instead of your credit score, several other factors play a significant role in interest rates.
Credit Score
FICO score and Vintage score are used in the writing of a car loan. Both scores depend on different measures such as credit mix, credit utilization, age of account, and payment history. Their score falls between 300 and 850 as both used their metrics and weighted method. Lenders prefer to use the FICO scoring system, which typically ranges from 200 to 900.
Lender
Buyers can get their loan through a bank or dealership. But dealership financing is the best option because you get on-the-spot approval, and there is no extra paperwork. Different lenders have their own but different criteria for loan interest rates.
Loan Term
Loan terms vary, generally, they range from 36 to 84 months. The average car loan length is 67.98 months for a new car, and for a used car, it is 67.20, according to the Experian report. You will pay a higher interest rate for a longer-term loan. If you have 84 months, you will definitely higher interest rate even if your monthly payment is lower.
Economic and Market Conditions
Other economic factors are also involved in setting the interest rate. When the Federal reserves increase its funds to combat inflation, this leads lenders to borrow more, which in turn increases the rate. If you have a good credit score, you are likely to pay less interest, whereas with a low credit score, you have no relief at all.
Interest Rates Are Just One Component of Your Car Loan
New cars have an average rate of 6.40%, whereas used cars have an average of 9.95% according to the Experian report. Some other factors to consider instead of a credit score.
Loan amount: If you borrow a larger amount the more you will pay a smaller amount or rate. The new car loan is $40,927, compared to a used car loan of $26,248 reported by Experian.
Fees: Auto lenders charge a 2% fee; this fee is not an application fee or origination fee. This fee is a prepayment penalty fee, and if you are late, then check how much the lender demands in fees.
How To Get A Better Auto Loan Interest Rate
You can increase the chances of getting an interest rate, regardless of your credit score, by using a few methods.
Prequalify for multiple lenders: before applying, search for lenders who can give you a loan and choose three of them. Some lenders required preapproval or prequalification for the loan. So you can decide according to your credit or budget. This method helps you score auto loan rates that are competitive.
Make a larger down payment: A Larger down payment decreases the amount you want to borrow. The down payment is the average of 20% of the car purchase price.
Get a Cosigner: If you have a lower credit score, but still want to buy a new car. Ask your friends and family members to cosign your auto loan if who has a good credit score. Lender has less risk as your cosigner will pay the debt if you are unable to do it.
How to Boost Your Credit Score
Before purchasing a new car, review your credit score and check if it helps you get a lower rate. If you have already financed a car and have higher rates, you still have the opportunity to decrease these rates. You have to pay the monthly payment on time, which increases your credit score, and in the end, you will refinance your auto loan.Auto Loan Interest Rates By Credit Score helps you in buying new or purchased car.