What is a good interest rate on a car?
But you're paying 17 percent interest. You don't need me to tell you this, but that's really, really high. High interest rates mean you spend a lot more time being underwater in a loan, and as long as you're underwater, your options for getting out of this car loan will go from bad to worse.
Credit score | Average APR, new car | Average APR, used car |
---|---|---|
Superprime: 781-850. | 5.64%. | 7.66%. |
Prime: 661-780. | 7.01%. | 9.73%. |
Nonprime: 601-660. | 9.60%. | 14.12%. |
Subprime: 501-600. | 12.28%. | 18.89%. |
But you're paying 17 percent interest. You don't need me to tell you this, but that's really, really high. High interest rates mean you spend a lot more time being underwater in a loan, and as long as you're underwater, your options for getting out of this car loan will go from bad to worse.
Typically, interest rates for car loans range from around 7% to 13% for those with good credit, and can be higher for those with poor credit. A 17% interest rate would result in a significant increase in the overall cost of the car, as well as higher monthly payments.
If you can get a rate under 6% for a used car, this is likely to be considered a good APR.
Bad credit auto loans are a type of purchase loan for those with a limited credit history or a low credit score. Interest rates for bad credit car loans range from 11.53% to 14.08% for new cars and 18.55% to 21.32% for used vehicles.
People with excellent credit qualified for rates around 5.61 percent, while people with bad credit had an average new car rate of 14.17 percent. Rates for used cars were higher — 11.35 percent across credit scores. And the average rate for bad credit was a sky-high 21.18 percent.
Credit Score | New Car Loan | Refinance Car Loan |
---|---|---|
750 or higher | 12.77% | 7.89% |
700-749 | 12.65% | 8.98% |
600-699 | 17.84% | 10.09% |
451-599 | 22.56% | 12.76% |
One way to lower the interest rate on a car loan is to compare rates and payments terms from different sources to know all your options. Be sure to ask your current lender for a lower APR on your car loan. If you are denied a loan, inform them of your other offers and see if they will match or beat the lowest offer.
Key takeaways. Your credit card APR can go up if the prime rate changes, you paid your credit card bill late, your intro APR offer ended or your credit score dropped. If your APR increases, you can work on paying down your balance or transfer your balance to a card with a low or 0 percent intro APR offer.
Is 72-month car loan bad?
Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.
Can you pay off a 72-month car loan early? Yes, you can pay off a 72- or 84-month auto loan early. Since these are long repayment terms, you could save considerable money by covering the interest related to a shorter period of time.
Car payment statistics
The average monthly car payment for new cars is $726. The average monthly car payment for used cars is $533. 39.20 percent of vehicles financed in the third quarter of 2023 were new vehicles. 60.80 percent of vehicles financed in the third quarter of 2023 were used vehicles.
Such rates have pushed vehicle loans closer to what's commonly considered high-interest debt — generally, any debt with an interest rate higher than 6% to 8%. If the interest rate on your auto loan is within that range, or exceeds it, here's why it might be a smart move to work toward paying it off early.
It's not a bad idea to keep shopping until you can get a rate of 8% or less. If your interest rate ends up being on the high side, take steps to reduce your total interest costs by making a larger down payment, trading in your current vehicle, and paying off your loan as fast as possible.
The Federal Reserve doesn't directly set auto loan rates — but it does affect the cost for lenders to borrow money. When the Fed increases rates, as they have 11 times since March 2022, it usually means lenders are quick to follow. High interest rates have offset any concrete wins from stabilizing vehicle prices.
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
Company | Used APR Range | Used Loan Terms |
---|---|---|
PenFed Best Overall | 6.49%–17.99% | 3–7 years |
AUTOPAY Best for Bad Credit/Low Rates | As low as 5.69% | 2–8 years |
Consumers Credit Union Best Credit Union | As low as 6.84% | 36–84 months |
LendingTree Best for Refinance | As low as 5.99% (Refinance) | 36–72 months (Refinance) |
With a bad credit score, you'll likely be offered some of the highest advertised rates. According to data from Experian, borrowers in the subprime category (a FICO score between 501 and 600) can expect an average rate of 12.28 percent for new cars and 18.89 percent for used cars.
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2022, the average FICO® Score☉ in the U.S. reached 714.
What is a good APR for bad credit?
Credit Score | Average APR |
---|---|
Deep Subprime (Credit score of 579 or below) | 21% |
Subprime (Credit score of 580 to 619) | 20.5% |
Near Prime (Credit score of 620 to 659) | 19% |
Prime (Credit score of 660 to 719) | 16.5% |
With rare exceptions, the older a car gets, the less it's worth. And accidents, repairs, or other damage can further reduce its value. So, if you borrowed money to buy a car, it's possible you owe more on your car loan than the car is worth. When that happens, you have “negative equity” in the car.
You'll typically need good or excellent credit (a score of at least 690 on the FICO scale) to qualify for most 0% APR credit cards. The ongoing interest rate, which is charged once a card's promotional period ends, will also depend on your creditworthiness.
For a 750-799 credit score, the average 48 month car loan rate is around 4.47%. For borrowers with a credit score of 720-850, the average APR offered in 2019 was 4.29%. In 2020, those with a credit score of 720-850 earned an average interest rate of 3.65% on a 72-month car loan.
References
- https://www.sofi.com/learn/content/i-make-36k-a-year-how-much-house-can-i-afford/
- https://www.bankrate.com/loans/auto-loans/average-monthly-car-payment/
- https://stairsfinancial.com/blog/i-make-25k-a-year-can-i-buy-a-house
- https://www.bankrate.com/loans/auto-loans/car-loan-mistakes-that-cost-you-money/
- https://stairsfinancial.com/blog/how-much-house-can-i-afford-on-40k-a-year
- https://www.tampabay.com/news/business/2020/02/17/dear-penny-i-bought-a-new-car-at-17-interest-how-can-i-lower-my-payment/
- https://www.marketwatch.com/guides/car-loans/bad-credit-car-loans/
- https://www.nerdwallet.com/article/credit-cards/can-use-credit-card-pay-car-loan
- https://www.cbsnews.com/news/should-you-buy-a-new-car-or-fix-cbs-news-explains/
- https://www.progressive.com/answers/car-down-payment/
- https://cars.usnews.com/cars-trucks/advice/tips-for-negotiating-at-a-car-dealership
- https://www.nerdwallet.com/article/credit-cards/good-credit-0-interest-card
- https://www.mercedesbenzgreenwich.com/what-is-a-good-interest-rate-for-your-car-loan/
- https://www.cainmortgageteam.com/20-down-payment-on-a-300-000-house/
- https://www.wilsonkia.com/finance/car-buying-tips/how-to-get-a-lower-interest-rate-on-a-car-loan/
- https://www.nerdwallet.com/article/loans/auto-loans/how-much-down-payment-make-buying-car
- https://www.chase.com/personal/auto/education/financing/car-loan-with-no-down-payment
- https://www.capitalone.com/cars/learn/getting-a-good-deal/what-are-the-benefits-of-putting-a-down-payment-on-a-car/1013
- https://www.lendingtree.com/auto/step-5-negotiating-car-prices/
- https://www.bankrate.com/mortgages/what-is-down-payment/
- https://themortgagereports.com/18520/20-percent-downpayment-risk-mortgage-interest-rate
- https://www.bankrate.com/real-estate/how-much-house-can-i-afford-90k-salary/
- https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-leasing-versus-buying-a-car-en-815/
- https://www.progressive.com/answers/how-many-miles-does-a-car-last/
- https://www.capitalone.com/cars/learn/managing-your-money-wisely/how-much-is-a-down-payment-on-a-car-your-guide-to-down-payments/1254
- https://www.amfam.com/resources/articles/at-home/closing-costs-vs-down-payments
- https://www.autotrader.com/car-shopping/whats-right-down-payment-car-loan-or-lease-212702
- https://www.onemainfinancial.com/resources/loan-basics/5000-personal-loan
- https://www.bankrate.com/loans/auto-loans/car-loan-with-bad-credit/
- https://www.capitalone.com/cars/calculator
- https://www.chase.com/personal/auto/education/buying/can-you-buy-a-car-with-a-credit-card
- https://www.progressive.com/lifelanes/on-the-road/when-to-replace-car/
- https://time.com/personal-finance/article/can-you-pay-a-car-loan-with-a-credit-card/
- https://www.moneyunder30.com/negotiate-with-car-salesmen/
- https://www.bankrate.com/finance/credit-cards/buy-car-with-credit-card/
- https://www.quora.com/How-much-house-can-I-afford-if-I-make-30-000-a-year
- https://www.jdpower.com/cars/shopping-guides/how-much-is-the-monthly-payment-on-a-30000-car-loan
- https://cars.usnews.com/cars-trucks/car-loans-and-leasing/car-payment-calculator
- https://www.cusocal.org/how-fast-will-a-car-loan-raise-my-credit-score
- https://www.nerdwallet.com/article/loans/auto-loans/average-monthly-car-payment
- https://www.linkedin.com/pulse/working-out-down-payment-500-enough-your-next-auto-loan-hendricks
- https://www.latimes.com/compare-deals/credit-cards/guides/good-apr-for-credit-card
- https://www.bankrate.com/finance/credit-cards/what-to-do-after-card-apr-increase/
- https://www.carmax.com/car-financing
- https://www.investopedia.com/best-auto-loan-rates-4846394
- https://www.calculator.net/down-payment-calculator.html
- https://www.sofi.com/learn/content/i-make-45k-a-year-how-much-house-can-i-afford/
- https://www.sofi.com/learn/content/is-40000-a-good-salary/
- https://www.creditkarma.com/auto/i/car-down-payment-benefits
- https://lendedu.com/blog/auto-loan-calculator/
- https://www.cnbc.com/2023/07/26/why-it-may-be-smart-to-pay-off-your-car-loan-early.html
- https://www.finn.com/en-US/blog/car-buying/what-is-the-average-down-payment-on-a-car
- https://www.carmax.com/faq/buying-a-car/what-kind-of-documentation-do-i-need-to-buy-a-car-at-carmax
- https://www.bankrate.com/loans/auto-loans/down-payment-calculator/
- https://thehub.santanderbank.com/im-financing-a-car-should-i-make-a-down-payment-or-pay-off-debt/
- https://www.usbank.com/home-loans/mortgage/first-time-home-buyers/credit-score-for-mortgage.html
- https://www.lendingtree.com/auto/how-much-money-should-you-put-down-on-a-car/
- https://cars.usnews.com/cars-trucks/advice/average-auto-loan-interest-rates
- https://www.moneylion.com/learn/can-you-buy-a-car-with-a-credit-card/
- https://www.solaritycu.org/post/articles/does-a-higher-down-payment-make-your-offer-stronger
- https://lanterncredit.com/auto-loans/down-payment-size
- https://www.nerdwallet.com/calculator/auto-loan-calculator
- https://www.bankrate.com/loans/auto-loans/how-to-pay-off-a-car-loan-faster/
- https://gitnux.org/average-car-loan-interest-rate-for-750-credit-score/
- https://www.snagajob.com/salary-calculator?pay=25&period=hour
- https://www.marketwatch.com/guides/buy-or-sell-car/carmax-review/
- https://www.bankrate.com/loans/auto-loans/car-loan-down-payment-benefits/
- https://www.fool.com/the-ascent/personal-loans/how-much-car-afford/
- https://www.carsdirect.com/auto-loans/car-loan-rates/what-s-a-good-apr-on-a-car-loan
- https://www.nerdwallet.com/article/loans/auto-loans/does-paying-the-principal-lower-a-monthly-car-payment
- https://www.autocreditexpress.com/blog/is-1000-a-large-enough-down-payment-on-a-used-car/
- https://www.sccu.com/articles/auto/60-month-vs-72-month-auto-loan-comparison
- https://www.rocketmortgage.com/learn/how-much-down-payment-for-a-house
- https://stellarfi.com/answer/what-credit-score-is-needed-to-buy-a-300k-house
- https://www.marketwatch.com/guides/car-loans/car-payoff-calculator/
- https://www.bankrate.com/loans/auto-loans/how-inflation-affects-auto-loan-rates/
- https://www.quora.com/Is-a-7-interest-rate-high-for-a-car
- https://www.lendingtree.com/auto/calculators/payment/
- https://www.carsdirect.com/auto-loans/can-you-make-a-50-down-payment-on-a-car
- https://www.caranddriver.com/auto-loans/a41867021/car-down-payment-with-credit-card/
- https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/
- https://www.forbes.com/advisor/credit-cards/down-payment-on-car-with-credit-card/
- https://www.thestreet.com/real-estate/down-payment-on-house-14686280
- https://themortgagereports.com/75530/down-payment-300000-house
- https://thisismortgage.com/if-i-make-55000-a-year-what-mortgage-can-i-afford/
- https://global.americanexpress.com/card-benefits/detail/auto-purchase-program/delta-reserve
- https://www.nerdwallet.com/article/loans/auto-loans/average-car-loan-interest-rates-by-credit-score
- https://www.nerdwallet.com/article/credit-cards/buy-car-credit-card
- https://www.exclusivemotorcarsmd.com/blog/large-down-payment-pros-cons-used-cars
- https://www.realtor.com/advice/finance/how-much-is-enough-for-a-down-payment/
- https://www.lendingtree.com/auto/what-credit-score-is-needed-to-buy-a-car/
- https://www.cbsnews.com/news/how-much-income-do-you-need-to-buy-a-250000-home/
- https://www.consumerfinance.gov/owning-a-home/prepare/determine-your-down-payment/
- https://consumer.ftc.gov/articles/auto-trade-ins-and-negative-equity-when-you-owe-more-your-car-worth
- https://themortgagereports.com/22502/how-to-buy-a-home-50000-per-year-income
- https://www.marketwatch.com/guides/buy-or-sell-car/when-is-the-best-time-to-buy-cars/
- https://www.edmunds.com/calculators/affordability.html
- https://www.carmax.com/buying-online
- https://www.marketwatch.com/guides/car-loans/pay-off-car-loan-early/
- https://www.cusocal.org/Blog/down-payment-on-a-car
- https://www.navyfederal.org/makingcents/auto/factors-affecting-car-payment.html
- https://www.lendingtree.com/auto/reviews/american-express/
- https://www.bankrate.com/loans/auto-loans/average-car-loan-down-payment/
- https://www.marketwatch.com/guides/car-loans/how-much-down-payment-for-a-car/
- https://www.cbsnews.com/news/how-much-house-can-i-afford-on-a-50000-salary/
- https://themortgagereports.com/70827/70k-per-year-salary-how-much-house-can-i-afford
- https://www.gobankingrates.com/investing/real-estate/income-needed-for-300k-mortgage/
- https://www.fool.com/the-ascent/research/average-credit-score/
- https://www.consumerfinance.gov/ask-cfpb/how-does-a-down-payment-affect-my-auto-loan-en-773/
- https://pricemortgage.com/large-down-payment/
- https://www.cbsnews.com/news/how-big-of-a-down-payment-should-i-make-on-my-home/