New car loans typically carry lower rates than used car loans because the vehicle holds more predictable value as collateral.
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Down payment matters
A larger down payment lowers your loan amount, reduces your monthly payment, and helps you avoid owing more than the car is worth.
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Shorter terms save money
A 60-month loan costs significantly less in total interest than a 72 or 84-month loan, even though the monthly payment is higher.
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Get preapproved first
Securing financing before visiting the dealership gives you negotiating leverage and protects you from inflated dealer markup rates.
New vs used car loan rates — the real gap
Lenders price new and used car loans differently because used vehicles depreciate faster and have less predictable resale value as collateral. Here's the typical rate gap by credit tier:
Average APR — new vs used vehicles by credit tier
Credit tier
New car APR
Used car APR
Excellent (720+)
5.5% – 7%
7% – 9%
Good (690–719)
7% – 9%
9% – 11%
Fair (630–689)
9% – 13%
12% – 16%
Poor (Below 630)
14% – 20%
17% – 25%
Why loan term length matters more than people think
Dealers often push longer terms because they create the illusion of affordability through a lower monthly payment. Here's what a $28,000 loan at 7.5% actually costs across different terms:
$28,000 loan at 7.5% APR by term length
Term
Monthly payment
Total interest
36 months
$871
$3,343
48 months
$677
$4,477
60 months
$561
$5,648
72 months
$484
$6,847
Key insight
Stretching from 60 to 72 months saves only $77 per month but adds over $1,200 in extra interest. Worse, longer terms mean the loan balance often exceeds the car's value for years — a dangerous position if you need to sell or the car is totaled.
Common questions
How do I calculate my car payment?
Subtract your down payment and trade-in value from the vehicle price to get your loan amount. Enter that amount with your interest rate and term to see your monthly payment, total interest, and total cost.
What credit score do I need for an auto loan?
Most lenders accept scores as low as 500 to 600, though the best rates require 720 or higher. Auto loans are secured by the vehicle, so approval requirements are generally lower than personal loans.
What is a good interest rate for a car loan?
Auto loan rates typically range from 5% to 20% APR. A good rate for excellent credit is generally below 7% for new cars and below 9% for used cars.
Is a 60 month or 72 month auto loan better?
A 60-month loan has a higher payment but less total interest. A 72-month loan lowers the payment but increases total interest and the risk of owing more than the car is worth.
How much should my down payment be on a car?
A common guideline is at least 10 to 20 percent of the vehicle price. A larger down payment reduces your loan amount and helps you avoid being underwater on the loan.