Decoding Auto Financing: Average Car Loan Interest Rates by Credit Score

When venturing into the world of auto financing, understanding the average car loan interest rates based on credit scores can be a crucial aspect of making informed decisions. Here, we break down the average APRs for new and used cars, categorized by credit score, providing you with valuable insights for your car-buying journey.

Average Car Loan Interest Rates & Credit Score (Q3 2023 – Experian Data)

Superprime (781-850):

New Car: 5.61%

Used Car: 7.43%

Prime (661-780):

New Car: 6.88%

Used Car: 9.33%

Nonprime (601-660):

New Car: 9.29%

Used Car: 13.53%

Subprime (501-600):

New Car: 11.86%

Used Car: 18.39%

Deep Subprime (300-500):

New Car: 14.17%

Used Car: 21.18%

Note: APR percentages represent the average interest rates for the respective credit score ranges.

Credit Score Impact on Interest Rates

People with credit scores above 780 have the best chance of securing the lowest interest rates.

Credit scores below 501 typically result in the highest interest rates.

Trends and Considerations

Federal Reserve Influence: Auto loan interest rates tend to follow the Federal Reserve’s actions. Rate hikes by the Federal Reserve can impact auto loan interest rates.

Current Scenario: As of December 2023, the overall average auto loan interest rate was 7.03% for new cars and 11.35% for used cars (Experian). Other sources, like Edmunds.com and Cox Automotive, reported slightly different figures, emphasizing the importance of checking multiple sources for up-to-date information.

Using Average Car Interest Rates Effectively

Know Your Credit Score: Understand your credit score, as it significantly influences the interest rate you might qualify for.

Explore Averages: Use average interest rates as a benchmark, especially those aligned with your credit score range.

Apply for Pre-Qualification: Many lenders offer pre-qualification with a soft credit check, providing an estimate of your qualifying rate without affecting your credit score.

Compare rates from various lenders to guarantee you secure the most favorable deal. Your final interest rate can be influenced by factors like loan term and vehicle age.

Keep in mind that, although average interest rates serve as a helpful benchmark, your specific rate will be established during the loan application process. Engage in comprehensive research, and take advantage of pre-qualification options to make well-informed decisions aligned with your individual financial profile. Additionally, streamline your financial planning by utilizing free budget spreadsheet templates.

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