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What Is a Good Auto Loan Interest Rate?
When shopping for a new car, many factors come into play, such as safety features, fuel efficiency, and design. However, securing a good interest rate on an auto loan is equally important. The best interest rate you can get depends on various factors, including your credit history, financial situation, and the vehicle’s price.
Factors Influencing Auto Loan Interest Rates
The interest rate on a car loan can vary significantly from one borrower to another. Here are some key factors that influence your rate:
- Your credit score
- Your credit history
- Your income
- Your debts
- The size of the loan
- The term of the loan (e.g., 48 or 60 months)
- The amount of the down payment
- The type of vehicle (new or used)
The interest rate affects how much money you’ll end up borrowing and your monthly payments. When shopping for a car loan, check the APR (annual percentage rate), which reflects the full cost of borrowing, including interest and fees.
Average Auto Loan Interest Rates
According to Experian’s latest State of the Automotive Finance Market Report, the average interest rate for a new vehicle rose to 6.58% in Q1 2023, up from 4.10% in Q1 2022. For used vehicles, the average rate increased to 11.17% from 8.67% over the same period.
Here are the average interest rates for new and used vehicles across different credit score ranges:
| Credit Score Range | Average Interest Rate, New Cars | Average Interest Rate, Used Cars |
|---|---|---|
| 781-850 | 5.18% | 6.79% |
| 661-780 | 6.40% | 8.75% |
| 601-660 | 8.86% | 13.28% |
| 501-600 | 11.53% | 18.55% |
| 300-500 | 14.08% | 21.32% |
How to Secure a Good Rate on an Auto Loan
No matter your credit score, you can take steps to secure the best rate possible:
- Shop around: Compare rates from at least three to five lenders, including banks, credit unions, and automakers.
- Make a bigger down payment: This can lead to a lower interest rate.
- Buy a new car: New cars often have lower interest rates than used cars.
- Choose a shorter loan term: A 48-month loan might have a lower rate than a 60-month loan, though it will result in higher monthly payments.
- Negotiate with the lender: You may be able to secure a lower APR through negotiation.
- Improve your credit score: Reducing debt and catching up on past-due payments can boost your credit score and help you get a better rate.
Improving your credit score can significantly impact the interest rate you receive. It may take 30 to 60 days to see a positive change in your credit score, but it’s worth the effort.
Contact O1ne Mortgage for Your Mortgage Needs
At O1ne Mortgage, we are dedicated to helping you find the best mortgage rates and terms. For any mortgage service needs, call us at 213-732-3074. Our team of experts is here to assist you every step of the way.
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