When financing a new or used car, knowing the average interest rate that other buyers receive can give you a valuable benchmark. Understanding what borrowers with similar credit scores pay helps you gauge what rate to expect and compare loan offers effectively.
Factors That Affect Auto Loan Interest Rates
Your auto loan interest rate is influenced by several factors, including your income, credit history, and credit score. Among these, your credit score is one of the most important, as lenders use it to evaluate your likelihood of repaying the loan. Generally, higher credit scores lead to lower interest rates.
The type of vehicle you buy also impacts your rate. Used cars typically carry higher interest rates than new vehicles.
New Tax Deduction for Auto Loan Interest
The “one big, beautiful bill,” signed into law in July 2025, introduces an auto loan interest tax deduction. Borrowers can deduct up to $10,000 annually for car loan interest for tax years 2025-2028. This applies whether you claim the standard deduction or itemize, but only for new cars with final assembly in the U.S. used for personal purposes. The deduction begins to phase out for individuals with modified adjusted gross incomes above $100,000, or $200,000 for joint filers.
Average Car Loan Interest Rates by Credit Score
According to Experian’s Automotive Finance Market report for Q3 2025, the overall average auto loan interest rate was 6.56% for new cars and 11.40% for used cars. Here’s the breakdown by credit score (VantageScore model):
| Credit Score | Average APR, New Car | Average APR, Used Car |
|---|---|---|
| Superprime (781-850) | 4.88% | 7.43% |
| Prime (661-780) | 6.51% | 9.65% |
| Nonprime (601-660) | 9.77% | 14.11% |
| Subprime (501-600) | 13.34% | 19.00% |
| Deep subprime (300-500) | 15.85% | 21.60% |
Borrowers with scores above 780 typically secure the lowest rates, while those below 501 often face the highest rates.
Interest Rate vs. APR
It’s important to note that auto loan interest rates and annual percentage rates (APRs) are not the same. The interest rate reflects the cost of borrowing, while the APR includes interest plus any lender fees. When comparing loans, focus on the APR for a more accurate picture of total costs.
How Auto Loan Rates Change
Auto loan rates often move in response to Federal Reserve adjustments to the federal funds rate. Rate hikes that began in 2022 drove car loan interest rates to multi-year highs, but recent trends show a decline.
Sources like Edmunds.com reported the January 2026 average auto loan rates at 6.8% APR for new cars and 10.5% for used cars. Cox Automotive’s volume-weighted averages for the same period were 9.41% for new vehicles and 14.03% for used cars.
Finding the Best Auto Loan
Knowing your credit score and the average rate for your category allows you to use auto loan calculators to estimate monthly payments for various loan terms. While averages are a useful guide, your actual rate will depend on lender offers, loan term length, and vehicle age.
To secure the best deal, compare multiple lenders. Many offer pre-qualification with a soft credit check to give you a preview of possible rates without affecting your credit score. If your current auto loan has a higher rate than the average, refinancing may help reduce both your interest rate and monthly payment.
