Current Car Loan Rates in the US. Apply online

Car loans serve as financial tools enabling individuals to acquire a new or used car without paying the full purchase price upfront. These loans typically require borrowers to pledge the purchased vehicle as collateral, securing the loan. Repayment terms usually span 24 to 84 months, during which borrowers commit to fixed monthly payments, covering the principal amount borrowed and the accrued interest. Auto loans can be sourced from various lenders, including national banks, local credit unions, and online financial institutions. Borrowers must compare Annual Percentage Rates (APRs) offered by multiple auto lenders to secure competitive rates and favorable repayment terms—such comparisons aid in minimizing fees and aligning repayment schedules with borrowers' financial capabilities.

Car Loan Features

New Car Loan. This type of loan is tailored for purchasing brand-new vehicles directly from dealerships or private sellers. New car loans typically offer competitive interest rates and favorable terms, making them an attractive option for buyers seeking the latest models with manufacturer warranties.
Used Car Loan. Used car loans are designed for purchasing pre-owned vehicles, whether from dealerships or private parties. These loans may come with slightly higher interest rates compared to new car loans, reflecting the increased risk associated with older vehicles. However, they provide financing options for buyers looking to save money by purchasing a reliable used car.
Auto Refinance. Auto refinance loans allow borrowers to replace their existing car loan with a new loan, often with better terms such as lower interest rates or extended repayment periods. This option is ideal for individuals looking to reduce their monthly payments or save on interest over the life of the loan.
Cash-Out Auto Refinance. Cash-out auto refinance loans enable borrowers to refinance their existing auto loan while also borrowing additional funds against the equity in their vehicle. This can provide extra cash for various purposes, such as home improvements, debt consolidation, or unexpected expenses.
Private Party Loan. Private-party auto loans facilitate the purchase of used vehicles from individual sellers rather than dealerships. These loans offer financing options for buyers interested in purchasing a car through private transactions, providing flexibility in vehicle selection and negotiation.
Lease Buyout Loan. Lease buyout loans allow lessees to purchase the vehicle they have been leasing at the end of the lease term. This type of loan provides financing to buy out the remaining value of the leased vehicle, allowing lessees to own the car outright instead of returning it to the lessor.

How Car Loans Rates Work

Car loan rates are determined by various factors, primarily borrowers' credit history and the terms of the loan. Lenders use credit scores to assess borrowers' creditworthiness, with higher scores typically qualifying for lower interest rates. Additionally, factors such as the loan amount, loan term, down payment, and vehicle age contribute to the interest rate offered. Borrowers with excellent credit scores and larger down payments are likely to secure more favorable rates, while those with poor credit or smaller down payments may face higher interest rates to offset the perceived risk.

Cost of Car Loans

The cost of car loans encompasses various elements, including interest rates, monthly payments, and total borrowing costs. Currently, average auto loan rates for new car loans range from 7.79% to 7.89% for 48-month terms and 7.89% for 60-month terms, while rates for used car loans average between 8.43% and 8.51% for 36- to 48-month terms. For instance, a 48-month, $36,000 auto loan with a 6% interest rate would result in a monthly payment of $845, totaling $4,582 in interest over the loan term, while the same loan with an 8% interest rate would yield a monthly payment of $879, totaling $6,186 in interest.

Legal Regulations

Navigating the intricate landscape of auto loan interest rates involves understanding the interplay between state usury laws and lending practices. While some states enforce strict caps on interest rates for car loans, others have loopholes and exemptions that allow lenders to circumvent these regulations. For instance, in South Carolina, although there's an 18% interest rate cap, dealerships and lenders can bypass this restriction by notifying the state beforehand, enabling them to charge exorbitant rates, as revealed by Consumer Reports. Additionally, the classification of car loans varies across states, with some not considering them as traditional loans, thereby exempting them from interest rate caps altogether. This complex system often results in costly and confusing financing scenarios that overlook state rate limits, potentially burdening borrowers with excessive interest rates.

Understanding your rights and protections under state usury laws is crucial for securing fair auto loan terms. Each state has its regulations, leading to significant variations in interest rate limits and consumer protections. For instance, while California imposes a 10% interest rate limit on certain transactions, neighboring states like Nevada may have no such restrictions. Furthermore, factors such as loan amount and term length also influence the applicable interest rate caps, adding another layer of complexity to the equation. To ensure compliance with state laws and protect against predatory lending practices, borrowers should familiarize themselves with usury laws in their state and seek legal recourse if they suspect any violations. Additionally, military servicemembers benefit from special provisions like the Military Lending Act and the Servicemembers Civil Relief Act, which offer additional protections against high-interest loans.

How to Get a Car Loan

Apply for a loan

Assess Your Financial Situation. Before applying for a car loan, evaluate your budget, credit score, and financial goals. Understanding your financial standing will help determine the type of loan and terms you can afford.
Check Your Credit. Obtain a copy of your credit report from major credit bureaus and review it for accuracy. A higher credit score typically translates to better loan offers with lower interest rates.
Research Lenders. Explore loan options from various sources, including banks, credit unions, online lenders, and dealership financing. Compare interest rates, loan terms, and fees to find the most competitive offer.
Get Pre-Approved. Pre-approval from multiple lenders allows you to compare loan offers without impacting your credit score. Submit loan applications with necessary documentation, such as proof of income and identification.
Negotiate Loan Terms. Once pre-approved, negotiate loan terms with lenders to secure favorable rates and repayment terms. Consider factors such as down payment, loan term, and interest rate to tailor the loan to your financial needs.
Finalize the Loan Agreement. Review the loan agreement carefully before signing to ensure accuracy and understanding of the terms. Clarify any questions or concerns with the lender before proceeding.
Purchase Your Vehicle. With the loan secured, finalize your car purchase from a reputable dealer or private seller. Ensure the vehicle meets your needs and budgetary constraints.

Conditions

Interest Rates. Lenders may offer interest rates based on borrowers' creditworthiness and prevailing market conditions. For instance, borrowers with excellent credit scores (781 to 850) may qualify for interest rates as low as 5.64% for new car loans and 7.66% for used car loans, according to Experian data from the fourth quarter of 2023.
Loan Terms. Depending on the lender, borrowers can choose from various loan terms ranging from 24 to 84 months. Longer loan terms result in lower monthly payments but may accrue more interest over the loan term, while shorter terms have higher monthly payments but lower overall interest costs.
Loan Amounts. Auto loan lenders typically offer loan amounts based on borrowers' credit history, income, and the value of the vehicle. Borrowers may qualify for loans ranging from a few thousand dollars to tens of thousands of dollars, with some lenders offering minimum loan amounts as low as $5,000.

Requirements

Credit Score. Lenders evaluate borrowers' credit scores to assess their creditworthiness. While specific requirements vary by lender, borrowers with higher credit scores generally qualify for better loan terms and lower interest rates. For example, borrowers with super-prime credit scores (781 to 850) may have the best chances of securing competitive loan offers.
Income Verification. Lenders typically require borrowers to provide proof of income, such as pay stubs or tax returns, to verify their ability to repay the loan. Borrowers with stable employment and sufficient income are more likely to qualify for larger loan amounts and better terms.
Debt-to-Income Ratio. Lenders consider borrowers' debt-to-income ratio, which compares their monthly debt payments to their gross monthly income. A lower debt-to-income ratio indicates less financial strain and a higher likelihood of loan approval. Lenders may have specific requirements regarding maximum debt-to-income ratios for loan approval, typically ranging from 36% to 45%.
Down Payment. While not always required, a larger down payment can improve borrowers' chances of loan approval and result in better loan terms. Lenders may offer more favorable rates and terms to borrowers who make substantial down payments, such as 10% to 20% of the vehicle's purchase price.

Best Places to Get a Car Loan

Carputty stands out as a direct lender offering a unique financing solution that allows borrowers to finance multiple vehicle purchases simultaneously through a single line of credit. The company's innovative V3 valuation tool aids customers in determining optimal buying and selling times, earning it recognition as the best auto loan for used car purchases.
Carvana revolutionizes the car-buying experience with its online platform, offering customers the convenience of shopping for and financing vehicles from the comfort of their homes. With options for pickup from their distinctive "car vending machines" or other delivery choices, Carvana provides a seamless and competitive car loan experience, making it the top choice for those seeking a fully online car-buying experience.
Capital One's auto financing services offer a comprehensive solution for borrowers, functioning as a convenient "one-stop shop" for both auto loans and vehicle purchases. Partnered with select dealerships, Capital One allows borrowers to secure loans starting from $4,000, with flexible terms ranging from 24 to 84 months. Their Auto Navigator site further enhances convenience by enabling users to browse inventory, compare costs, and customize financing options.
Consumers Credit Union distinguishes itself as an ideal choice for used-car buyers seeking same-day loan approval, minimal vehicle restrictions, and added benefits like a rate discount with automatic payments. With no maximum restrictions on vehicle age or mileage, no minimum loan amount, and flexible loan terms, Consumers Credit Union offers a hassle-free borrowing experience with attractive perks for borrowers.

Alternatives

Personal loans offer flexibility in borrowing and can be used for various purposes, including purchasing a vehicle. Borrowers can obtain personal loans from banks, credit unions, or online lenders, and use the funds to buy a car from a dealership or private seller. Personal loans typically have fixed interest rates and repayment terms, allowing borrowers to budget their payments effectively.
Homeowners may consider tapping into their home equity through a home equity loan or line of credit (HELOC) to finance a vehicle purchase. These credit products leverage the equity built up in the home and typically offer lower interest rates compared to traditional car loans. However, using home equity for vehicle financing puts the home at risk if borrowers fail to repay the loan.
P2P lending platforms connect borrowers directly with individual investors willing to fund their loan requests. Borrowers can apply for personal loans through P2P lending platforms, often at competitive rates and with flexible terms. P2P lending may be suitable for borrowers who cannot qualify for traditional financing or prefer an alternative borrowing option.
Credit unions offer competitive auto loan options to their members, often with lower interest rates and flexible terms compared to banks and online lenders. Membership eligibility criteria vary by credit union but may include factors such as employment, location, or affiliation with certain organizations. Credit union loans typically provide personalized service and may offer discounted rates for members with excellent credit or automatic payments.

Editorial Opinion

Car loan rates play a crucial role in shaping the accessibility and affordability of vehicle ownership for consumers. While fluctuating interest rates are influenced by various economic factors, including inflation and monetary policies, maintaining a balance between competitive rates and prudent lending practices is essential. Higher rates can deter potential buyers, impacting both individual purchasing decisions and broader economic trends. Conversely, excessively low rates may encourage irresponsible borrowing and inflate vehicle prices. Striking a balance that fosters responsible borrowing while facilitating access to transportation remains a key challenge for financial institutions and policymakers alike.

Important

Keeping your Debt-to-Income (DTI) ratio below 30-40% of your monthly income is crucial. This will help you avoid potential financial problems in the future. Additionally, always assess the necessity and feasibility of taking a loan, ensuring you can comfortably manage its repayment.

How to Choose a Car Loan Lender

Verify Licensing. Confirm that the lender is licensed to operate in your state. You can verify this with your state regulator or attorney general.
Check Associations. See if the lender is a member of reputable associations such as the National Automobile Dealers Association (NADA), American Association of Private Lenders (AAPL) or American Bankers Association (ABA). Membership in such organizations can provide additional assurance of reliability.
Review Terms and Conditions. Carefully read all the terms and conditions of the car loan contract. Pay attention to the loan term, interest rate type (fixed or variable), and any penalties for early repayment.
Interest Rates and Costs. Examine the interest rates and ensure that the contract includes a detailed breakdown of the total cost of the loan, including any fees and additional charges.
Right of Rescission. Remember you can take advantage of your right of rescission, which usually allows you to cancel the loan within a few days after signing the agreement. Use the "cooling-off" period to review the contract thoroughly before making a final decision.
Compare Lenders. Obtain quotes from multiple lenders, including banks, credit unions, and online lenders, to compare interest rates and terms. This will help you find the most favorable car loan for your needs.