Aaron Widmar
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What Is the Average Interest Rate on a Car Loan?

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How to tell if you’re getting a good rate when financing your new car

Brunet woan using her laptop and tablet to find the best APR interest rate on a car loan.
Save money by finding the best APR

Buying a car is a lot of money, whether it’s a brand-new vehicle or a pre-owned one. So, you don’t want to pay more than you have to on monthly interest. When you’re financing your loan, make sure that you’re getting a competitive interest rate. How can you determine that? Compare it to the national average APR and consider your credit history.


Have Questions About Financing a Car? Here’s a helpful FAQ to explain the process


How do you know if you’re offered a good APR?

According to data from ValuePenguin in October 2020, “The national average for U.S. auto loan interest rates is 5.27% on 60-month loans.”

Let’s put that in perspective. If you financed a new car for $25,000 at a rate of 5.27% for 60 months, you’d pay around $3,500 in interest over the course of the loan. That’s an extra $58 each month on top of your normal principal payment.

If you pay off your car loan early, though, you won’t have to pay that total cost of interest.

That average can fluctuate significantly year-to-year based on the economy, so only use that metric as a broad guide. You can usually deem that rates around 2-4% are competitive, while rates around 7-8% are a bit high, and anything around or above 10% is very high.

You can’t be guaranteed to get a low or average rate, though, since many factors determine the rate the bank/lender will offer you. In addition to market influences, the interest rate considers your income, existing debt, loan length, credit history, down payment, and the vehicle itself.

The best you can do to ensure a competitive APR on your next car loan is to manage your finances well, build your credit history, and shop around to gauge all your options.


Planning on Buying a Used Luxury Car? Make sure you read this guide first!