What Is a Good Interest Rate on a Car Loan?

Updated September 2026 · 5 min read

A good rate depends on three things: whether the car is new or used, the term length, and your credit. As a rough guide, borrowers with excellent credit see new-car rates in the mid single digits, while each step down the credit ladder adds several points.

Rough ranges by credit tier

• Excellent (720+): new car around 5-7%, used car a point or two higher.
• Good (660-719): new car around 7-10%, used around 9-12%.
• Fair (600-659): new car around 11-15%, used higher still.
• Subprime (below 600): 17% and up, if approved at all.

Used-car loans and long terms nearly always carry higher rates, because the lender takes more risk.

How lenders set your rate

The rate is a base cost of money plus a margin for risk. The base moves with the broader market, so the same borrower can be quoted different rates months apart. The margin depends on your credit score, income, down payment and the loan-to-value ratio.

How to get the lowest rate you qualify for

• Shop at least three to five lenders, including a credit union.
• Get preapproved so you compare rates before you are at the dealership.
• Improve your credit first if you are near a tier boundary - sometimes a few points is a lower tier.
• Choose a shorter term and a bigger down payment.

Watch the whole picture

A low rate on a long loan can cost more than a slightly higher rate on a short one, because you pay interest for more months. Compare total interest, not just the rate, using the auto loan calculator.

How to compare two loan offers

Do not compare rates alone - compare the total interest over the life of each loan. A 5.9% rate over 72 months can cost more than 6.4% over 48 months, because you pay interest for two extra years. Ask each lender for the amount financed, the APR, the term and the total of payments, then subtract the amount financed to get the true interest. The lowest total is the cheaper loan, even when its rate looks higher.

Frequently asked questions

Is 0% APR real?

Yes, but it is usually a manufacturer subsidy on specific models. You often give up a cash rebate to get it, so compare the two.

Does a longer term cost more?

Almost always. It lowers the monthly payment but increases both the rate and the total interest.