Auto loans: what your rate really depends on
A new-car 60-month loan averages 6.82% today, but the spread by credit is enormous — superprime borrowers pay 5.18%, subprime buyers 13.22%. The two decisions that cost you most are the term length and where you sign.
| Credit tier | Score range | New | Used |
|---|---|---|---|
| Superprime | 781–850 | 5.18% | 6.94% |
| Prime | 661–780 | 6.70% | 9.06% |
| Nonprime | 601–660 | 9.83% | 13.74% |
| Subprime | 501–600 | 13.22% | 18.99% |
| Deep subprime | 300–500 | 15.77% | 21.55% |
Source: Industry-standard credit tiers, Q2 2026 averages. Used-car rates run higher because the collateral depreciates faster.
Two numbers decide the true cost of a car loan, and the rate is only one of them. The other is the term. Lenders and dealers advertise the monthly payment precisely because a longer term makes any car look affordable — stretch the loan and the payment falls, even as the total you hand over climbs.
The second trap is where you finance. The rate a dealer quotes has usually been marked up from the rate the lender actually offered; the spread is dealer profit, bundled invisibly into your payment. Walk in with a pre-approval A lender's conditional commitment to fund your loan at a set rate before you shop — turns the dealer's finance desk into a competition. Full definition → and that markup has nowhere to hide.
Because a car is secured A loan backed by an asset the lender can seize if you default — here, the vehicle itself. Full definition → by the vehicle, auto rates sit well below unsecured personal loans — but the collateral is a depreciating asset, which is why used-car rates run higher and long terms leave you owing more than the car is worth.
See the term trade-off yourself
Enter the amount you are financing after your down payment and trade-in. Then change the term from 60 to 72 months and watch the total interest, not just the payment.
New bank loan or dealer financing?
Bring your own financing when
- Your credit union quotes a rate you can hand the dealer to beat
- You want the markup out of the deal entirely
- You are buying used, where dealer rates climb fastest
- You value a clean, separate loan you can refinance later
Dealer financing wins when
- The manufacturer is offering true 0% or subsidized APR
- A rebate plus low APR genuinely beats your bank quote
- You have thin credit and the captive lender is more flexible
- The convenience is worth a small rate premium to you
Questions before you finance
Should I get financing from the dealer or my own bank?
Get pre-approved by a bank or credit union first, then let the dealer try to beat it. Dealers mark up the rate they are quoted by the lender — that markup is theirs to keep. A pre-approval turns the finance office into a competition you are already winning.
Is 0% financing better than the cash rebate?
Not always. A $2,500 rebate taken as a bigger down payment can beat 0% once you run both through the math — especially on shorter terms where the interest you would have paid is small. Never assume; calculate both offers side by side.
How long a loan term should I take?
The shortest one whose payment you can live with. Stretching a $32,000 loan from 60 to 72 months trims the payment by about $84, but costs roughly $1,547 more in interest and keeps you
Can I refinance a car loan?
Yes, and it is underused. If your credit has improved since you bought, or you took dealer financing at a marked-up rate, refinancing can drop the rate with no cost to you. It makes the most sense early in the loan, while most of your payment is still interest.