Average Auto Loan Interest Rates By Credit Score (June 2022) - MarketWatch

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All APR figures last updated on 6/6/2022 – please check partner site for latest details. Rate may vary based on credit score, credit history and loan term.
While many factors play a role in the interest rates you’re offered for car loans, your credit score is the most influential. Knowing average auto loan interest rates by credit score can give you an idea of what you might qualify for and help you determine whether you’re getting a good rate on your vehicle loan.
In this article, we at the Home Media reviews team break down auto loan interest rates by credit score for new and used car loans. We also examine how auto loans work and where you can find the best auto loan rates for your credit profile.
Creditors group people into categories — sometimes called credit bands — based on credit-scoring models like FICO® and VantageScore. While other factors affect the auto loan interest rates you’re offered, the credit band your score falls into is among the most influential.
The following table shows the ranges of scores that define these categories, as well as the average auto loan rates for new and used car purchases for each category. This data comes from Experian’s most recent State of the Automotive Finance Market report.
Credit Score Range
Credit Category
Average Loan Rate
for New Car Purchase
Average Loan Rate
for Used Car Purchase
781–850
Super prime
2.47%
3.61%
661–780
Prime
3.51%
5.38%
601–660
Near prime
6.07%
9.8%
501–600
Subprime
9.41%
15.96%
300–500
Deep subprime
12.53%
19.87%
An auto loan is a type of secured loan that uses the car that’s being financed as collateral. When you finance a car, the lender becomes the lienholder and is the owner of the car title until you pay the loan off.
In essence, this means that while you have the legal right to possess and use the car, it’s the lender that truly owns it. If you fail to make your loan payments, the financial institution can repossess the vehicle.
When you shop for auto loans, you’ll likely see them advertised by annual percentage rate (APR). This figure includes your interest rate and the fees and other costs that come with the loan.
Before you start filling out loan applications, consider using an auto loan calculator to help you get an idea of how rates affect what you might pay. Many loan calculators allow you to enter basic information such as your desired loan amount, rate and term to see how much your monthly car payments would be and how much you’d pay in interest over the lifetime of a loan.
Auto lenders set interest rates based in part on the likelihood of repayment. The riskier the loan is for the lender, the higher the interest rate it is likely to charge. Several factors indicate risk to lenders and can affect the interest rate you get on a loan.
Here are the most critical factors used to determine your rates:
Credit scores have been widely used since 1989, when FICO, which currently has the most popular scoring model, introduced its system. Credit scores are meant to tell lenders how likely you are to make your required payments on time and in full. Your FICO credit score is based on the five factors below, which are weighted differently.
Lenders don’t all offer the same auto loan interest rates by credit score. You’ll likely find a range of rates available to you if you compare auto loan offers. That’s why it’s good to shop around. There are a number of places you can find auto loans. Some may have better loan options than others, depending on your circumstances.
Most traditional banks offer new and used car loans. Many also offer refinance auto loans, as well as preapproved auto loans that can give you an advantage in the car buying process and make financing easier. If you already have a checking account, savings account or credit card with a certain bank, you may have an easier time getting approved for an auto loan with that financial institution. You may even get a better rate.
Like banks, credit unions typically offer financing and refinancing for new and used vehicles. However, you have to be a member of a credit union to access its financial products. Membership requirements vary, but the process is simple for many credit unions. Joining can be worth it since credit unions often offer lower interest rates and are more likely to approve loans for borrowers with bad credit.
Since they don’t have the overhead of physical branches like banks and credit unions, online lending institutions can sometimes offer lower rates. Many of these lenders are backed by commercial banks or are divisions of commercial banks.
Lending marketplaces let you easily compare car financing offers. After you enter your information on one of these websites, you’ll get several loan offers from different lenders. Using these marketplaces can be a good way to find the lowest rates for your credit profile.
Car dealerships can sometimes offer the lowest auto loan interest rates. While 0% financing is only available for those with excellent credit, you’ll have a hard time finding it anywhere else. But some dealerships offer high interest rates compared to other lenders. Knowing what rates to expect and not allowing yourself to get worn down at the dealership can help you navigate this situation.
Getting a preapproved car loan from another financial institution before you head to the lot may help you negotiate for a better rate, as the dealership may try to beat the other lender’s rate to win your business.
If you’re looking for the best auto loan rates, these tips may help:
Nearly all lenders set auto loan interest rates by credit score to some extent. While other factors affect the rates available to you, your credit score typically plays the most influential role. Between banks, credit unions, online lenders, loan marketplaces and car dealerships, you have plenty of options for auto loans. Depending on your situation, one may offer you better rates than others.
While no one lender offers the best rates for everyone, some offer better auto loan interest rates by credit score than others. The only way to know whether you’re getting the best auto loan rates for your credit score is to source loan offers from several lenders and compare them. We recommend myAutoloan and Auto Credit Express as good places to start your search.
As a loan marketplace, myAutoloan lets you source offers from lenders in one place. This can help you find the best auto loan interest rates by credit score with less legwork than reaching out to lenders on your own. Rates for borrowers with excellent credit scores start at 1.9% for new cars and 2.15% for used cars, but those with credit scores of 575 or above can find loan offers through the site.
If your credit score is on the lower end of the spectrum, you may have a hard time finding auto loans from traditional lenders. Auto Credit Express is a financing broker that specializes in securing financing for people with bad credit. Borrowers with bad credit, no credit or even bankruptcies may find loans through Auto Credit Express, even if they’ve had a hard time getting financing elsewhere. Because Auto Credit Express works with multiple lenders, rates and credit requirements vary.
Having a 700 credit score puts you in the “prime” category for borrowing. According to Experian, the average rates for this category are 3.51% for new-car loans and 5.38% for used-car loans.
A 640 credit score puts you in the “near prime” category of borrowers, which is generally good enough to get a loan to buy a car. However, while you’ll likely be approved for an auto loan, you won’t get the best rates.
Generally speaking, the higher your FICO score is, the more likely you are to be approved for a loan and the lower your interest rate will be. However, some providers offer loans to people with low credit scores, and some even specialize in bad credit car loans. If you have a low FICO score, you should expect high interest rates.
A credit score of 620 puts you in the “near prime” category of borrowers. According to Experian, the average interest rates for people in this category are 6.07% for new-car loans and 9.8% for used-car loans.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.
In this article, we selected companies with high overall ratings and cost ratings. The cost ratings were informed by starting APR and loan amounts.
*Data accurate at time of publication
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