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skynesher/Getty Images August 29, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff. Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. Mark Kantrowitz is an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
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Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Car loan interest rates are determined by your credit score. The lower your score, the higher your interest rate will be. However, you don’t need a perfect score to get a good rate. To find the , it is wise to shop around and work to improve your credit score if it isn’t in the best shape. Average auto loan interest rates by credit score
Car loan interest rates are tied directly to your credit score. With that said, you can still get a decent rate without having top-tier credit. To get a better idea of just how much of a difference a can make, and an idea of where your interest rate might land, it’s worth looking at the average rates by credit score. Credit score Average interest rate for new car loans Average interest rate for used car loans 781 to 850 2.96% 3.68% 661 to 780 4.03% 5.53% 601 to 660 6.57% 10.33% 501 to 600 9.75% 16.85% 300 to 500 12.84% 20.43% Source: Factors that affect auto loan interest rates
While your credit score will play a large part in determining how much interest you pay, there are other factors to consider alongside it. Credit score
The two most common scores used when underwriting car loans are FICO and VantageScore. Both account for several measures of financial wellness, including payment history, credit utilization, credit mix and average age of accounts. There are some differences in the number of metrics used and how they’re weighted. But both scores fall between 300 and 850. Lender
Different lenders are going to have different credit underwriting criteria. Aside from credit score, your income and debt-to-income ratio are going to be considered. Some may take into account your education or professional experience or weigh it more heavily than others. Outside of qualification and underwriting standards, some lenders also just offer lower rates in general than others. Just know that the lowest APRs — those typically listed on lender websites — go to borrowers with excellent credit. Amount borrowed
Both the price of the vehicle and your down payment factor into the amount borrowed. If you’re not willing to put more than the required amount down, the lender may see it as increased risk and up the interest rate to compensate. Length of the loan
The longer your loan term, the more interest you’ll pay. But, aside from the additional interest accrued, lenders may charge higher interest rates for longer loans. How to get a better auto loan interest rate
There are a few ways to improve your chances of getting a competitive interest rate, regardless of your credit score. Shop around
Shop around with multiple lenders, including banks and , and compare auto loan interest rates. Not all lenders report to credit bureaus, so if you’re trying to build your credit make sure to pick one that does. Apply for preapproval
It is a good idea to with at least three lenders before you settle on one. You will be required to provide some personal and employment information, but not every rate quote will require a hard credit check. Because some do require a hard pull, it’s best to keep your application window to about two weeks. Make a larger down payment
A down payment decreases the amount you need to borrow. By decreasing the amount borrowed, the lender takes on less risk. Less risk translates to lower interest rates. Get a co-signer
If you have a lower credit score, consider asking a family member or trusted friend who has an excellent credit score to . Your co-signer will assume the debt if you can’t pay it back, which means there’s less risk for the lender. Keep in mind that this can put strain on a relationship if you are unable to pay. Where to find the best auto loans
There are many different avenues you can use to find the best auto loan. Banks. If you already have a relationship with a bank and have a high credit score, your bank may provide one of the most competitive interest rates. But read the entire agreement before you sign — some banks write in a clause that allows them to take from your checking or savings. Credit unions. Like a bank, if you’re a member of a credit union, it may offer a competitive interest rate. And if you have less-than-perfect credit a credit union may be willing to look past that and still extend a reasonable rate. Online lenders. There are several online lenders that offer auto loans you can prequalify for. As with most direct lenders, you’ll likely get a better rate than you would by applying with a dealership. Car dealers. This is one of the biggest ways that you can get . Dealers add markups to interest rates provided, which means you’ll be stuck paying more than if you . Check with several different lenders before going to a dealership to get the best deal possible. The bottom line
Low car loan rates are typically reserved for borrowers with near-perfect credit scores. And while it’s good background to know the average rates, you’re not guaranteed to get the figure corresponding to the credit bracket you’re in. Whether you know your credit score or not, you can prequalify with lenders online and off to see what kind of rates you’re eligible for. Learn more
SHARE: This article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff. Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. Mark Kantrowitz is an expert on student financial aid, the FAFSA, scholarships, 529 plans, education tax benefits and student loans. Related Articles