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Rate Trends
What is an Auto Loan?
Though fairly self-explanatory, an Auto Loan is a loan taken out to buy a specific vehicle, either new or used, from a dealer or third-party seller.
How to Read the Average Rate Chart
Every day, Credit Karma stores and tracks Auto Loan rates from hundreds of lenders nationwide. Our data is broken out into 3 year, 4 year, and 5 year loans for new vehicles at a loan amount of $25,000.
As with most loans, the best time to finance is when rates are at their lowest. A vehicle, however, is not always a purchase you have the ability to put off until rates reach a point at which you're comfortable. If you need a car now, finding a lender that can get as close to your desired rate as possible is more important than the prevailing average rate.
If you can afford to wait, this chart lets you see where rates have been so you can get a sense of where they might be going.
Auto Loan Features
- Most lenders offer terms from two to seven years (24 to 84 months).
- The maximum amount of money you are permitted to borrow and your interest rate depend on two main factors, the lender and credit score.
- With most lenders, interest rates increase as the length of the loan increases and as the age of the vehicle increases (once it is no longer classified as "new").
- Unlike Mortgage and Home Equity Loan rates, Auto Loans are often still funded with other deposit funds the lender has on hand, such as CDs and other time/savings deposits. So while there is a relationship between Auto Loans and the Federal Funds Rate (because it affects those deposit rates), it is not a direct relationship.
Auto Loan Benefits
A new car in the driveway! Nothing gives you the freedom to go wherever you want, whenever you want, like a vehicle of your own. Coupes, sedans, trucks, vans, SUVs, convertibles... they all have their place, whether for work, play, or a combination of the two.
Auto Loan Considerations
Vehicles have a tendency to be something on which people overspend. Be careful not to overextend yourself financially because you want the bigger engine or the better sound system. Also, with gas prices as high as they are it's important to factor in those costs when thinking about any given vehicle.
Longer repayments terms (five or more years) may mean lower payments but they also mean a higher interest rate and you end up paying more overall than you would with shorter repayment terms. In the same vein, most cars depreciate rather quickly and the longer you take to pay off your loan the wider the gap between what the car is worth and what you still owe.
Where to go for an Auto Loan
Your bank or credit union may be a good place to start, but like any loan or line of credit it's important to compare several options.
Comments
22 Total CommentsComment On This Article
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This chart/article is meaningless without posting the corresponding credit scores.
kingcake64 2 years ago
Totally agree, kingcake64. I have a bad credit score and my auto loans average 19-24%. :-(
It is VERY difficult, if not impossible, to get out of this rut. I don't stress over it. The rich will get richer and the poor will pay for being poor for all of their lives.
blmbmj 1 year ago
After you pay 3-6 months of your auto loan on time, and in the mean time try to reduce the overall credit balance, you should be able to increase your credit score significantly. Then, you ought to try refinancing your auto loan. It's very possible that you'll get around 11%. That'll save you A LOT. I only earn a poorly $1,500/month, but I have a credit score of 762, and I can get an auto loan at around 5%. You can do it too.
ygtai 1 year ago
Excellent point. If your score increases considerably, you can generally save hundreds a month by refinancing your auto loan.
CK Moderator
u should stress over it...
dhart2020 1 year ago
During the first 3-6 months, you are decreasing your outstanding principal very slowly. Your balance is not likely decreasing as much as you think.
Try finding a credit union when you refinance...their rates are usually way lower.
duanej987 1 year ago
hey, Why I am seeing rates in the range of 11% to 21% for autoloans? What abt the manufacturer's apr offers, they normall are <4% right!! why haven't any of you guys use that?</p>
gates2010 1 year ago
CK Moderator
That's good news for me. I earn $1,800/month, and my credit score is 700. I'm thinking about buying a car but I'm worried about the insurance. I'm 26 years old so I hope it's not too high.
Kryztian 1 year ago
can I go ahead to a credit union first for an auto loan or do I have togo to the dealer?
Thank you.
rheaRN 10 months ago
once you turn 25, insurance is cheaper. good credit score!, I am 25, married and I pay $107 a month for 3 vehicles,wife included on the policy. 08 Honda Accord Full Coverage, $50000/25000 coverage. the other 2 vehicles liability insurance only. in Central CA throuhg Mercury Insurance Company
leovelazquez 10 months ago
I had a autoloan for 2 years and I dont think I was late once. I was told that if I payed the loan on time I would be eligable for a lower intrest rate. It was 21%. When I traded the car in they would only go down 1% what gives?
sweetpea4424 1 year ago
If you have a poor to fair credit score are you more likely to get a better rate/financed at all if you purchase a new car?
anybody know?
11danijo11 1 year ago
I purchased a vehicle with a 19% rate and after one year of on time payments, paying more than the agreed upon amount I was denied a refinancing due to the balance being too low. Do not wait too long.
IpushWeight 1 year ago
This article and others on CK are helping me to decide how to purchase an automobile using all of the options that are available. I have discovered that if you can obtain a loan from either a Credit Union or your bank, the interet rates are much better. However, I was not able to find out that when you purchase from a dealership - if they have any type of relationship with the actual financing done through them. Does anyone know?? Thanks!
drmkachr 1 year ago
Some dealerships won't accept out side financing. In those cases, just make sure there is not clause prohibiting refinance. Then simply refinance the loan with the Credit Union in 30-60 days.
CK Moderator
my credit score is good How much car I can afford?
LLyana 1 year ago
The next thing that you need to do is set your parameters. Maybe you are looking for a used car within a specific price range (which is the most parameter that people use). However, there are other common parameters such as make and model. If you prefer a specific brand, then limit your search to cars within that brand. Mileage is another common consideration. Regardless of what your parameters are, they will be guiding you through the rest of your journey, so make sure that every car that falls within those parameters would be one that you would feel satisfied purchasing.
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<a href="http://used.gov-auctions.or" rel="dofollow">used cars for sale</a>
rashmi005 1 year ago
my credit score is 558, I only have 2000 in debt.. i have been paying on it.. I am 23 and tried to get a car but they told me that I don't have any or no credit.. Why can't people get cars if they have no credit.. makes no since to me
lovingmyboo 9 months ago
Of course you can get a car. Just pay in full, then it doesn't matter if you have credit or not. Credit is for borrowing money. Lenders check your credit to see their risk of getting the money they lend you back. It's not people can't get cars if they have no credit, it's people can't get cars if they have no money -- either they don't have their own money, or they are not able to borrow the money. So evaluate yourself if you can afford the cost for the car you want.
ygtai 9 months ago
Great answer
sandshark 2 months ago
The problem here is that it won't allow you to update information like paid off credit cards, new auto loan lender, and the balances are incorrect.
jjelizalde 9 months ago