Finding the answer to what is a good car loan rate in 2025 can feel confusing, especially with rates changing every few months. A good rate isn’t one-size-fits-all—it depends on your credit score, income, and whether you’re buying new or used. The difference of just 1% can mean paying thousands more over the life of your loan.
Understanding car loan interest rates, comparing average auto loan rates, and checking the latest updates from the Federal Reserve interest rate impact are key steps. Whether you’re exploring credit union auto loans or online lenders, knowing the benchmarks helps you secure the best deal possible.
What Does “A Good Car Loan Rate” Mean?
A good car loan rate is not the same for everyone. It depends on your credit score, the type of car you buy, and the lender you choose. For most people, a “good” rate means one that is lower than the average auto loan rates reported in the market. Lenders also look at your debt-to-income ratio (DTI) and how stable your income is before deciding.
It’s also important to understand the difference between an annual percentage rate (APR) vs. interest rate. The interest rate is just the cost of borrowing money. The APR includes fees and gives you the real cost of your loan. When comparing loans, always use APR to make sure you’re seeing the full picture.
What Is the Average Car Loan Interest Rate in 2025?
In the Q2 2025 Auto Finance Market Report by Experian Automotive, the average rate for a new car loan is 6.80%, while used car loans average 11.54%. This shows how much more expensive it is to finance a used car compared to a new one.
Industry sources also share updates. Edmunds.com reported average new car loans at 7% in August 2025, while Cox Automotive / Dealertrack listed 9.43% for new and 14.12% for used loans. These numbers highlight why it’s important to shop around and compare lender offers before making a decision.
Average Car Loan Rates by Credit Score Range
Your credit score is the biggest factor in what rate you’ll pay. According to VantageScore credit scoring model data from Experian Automotive, borrowers are divided into five categories.
| Credit Score Range | Category | Average APR New Car | Average APR Used Car |
|---|---|---|---|
| 781–850 | Superprime | 5.27% | 7.15% |
| 661–780 | Prime | 6.78% | 9.39% |
| 601–660 | Nonprime | 9.97% | 13.95% |
| 501–600 | Subprime | 13.38% | 18.90% |
| 300–500 | Deep subprime | 15.97% | 21.58% |
This table makes it clear: the higher your score, the lower your auto loan APR. Someone with Superprime credit will save thousands compared to a borrower in the Deep subprime group.
How Often Do Auto Loan Rates Change?
Rates are not fixed forever. They often move in response to the Federal Reserve (Fed rate hikes/cuts). When the Fed raises rates to control inflation, lenders raise their car loan offers. When the Fed cuts rates, auto loan rates usually follow.
Some sources, like Edmunds.com, update averages monthly. Others, like Cox Automotive, release reports based on sales data from Dealertrack. This means rates can change quickly, so it’s best to check the market often before applying.
Factors That Affect Car Loan Interest Rates
Several things beyond your credit score can affect your rate. Lenders look at your loan repayment term (36, 48, 60, 72 months), the type of car you buy, and whether it’s new or used. A larger down payment lowers risk for the lender and often gets you a better deal.
Your debt-to-income ratio (DTI) is another key factor. If too much of your income goes to debt payments, you’re seen as risky. The lender may charge higher car loan interest rates or even reject the application.
What Is a Good APR for a Car Loan?
A good APR for a car loan in 2025 usually means under 7% for new cars if you have strong credit. For used cars, anything under 10% is considered fair. Keep in mind that APR includes both interest and lender fees, so it’s the best way to compare loans.
If your score is low, you might see higher APRs. But you can still improve your deal by comparing offers, considering credit union auto loans, or applying with a co-signer. These steps can help lower your rate even if you fall in the Nonprime or Subprime ranges.
How to Get the Best Car Loan Rate
To get the best deal, start with your credit. Paying down credit cards, fixing errors, and reducing debt will raise your score. This can move you from Subprime to Prime, saving thousands in interest.
Shopping around is also key. Compare credit union auto loans, online auto financing, and national auto lenders like Honda or Land Rover. Pre-qualify with multiple lenders to see the rates you can expect without hurting your score.
What Is a Good Car Loan Rate for New vs. Used Cars?
Rates differ greatly between new car loan vs. used car loan. For new cars in 2025, rates average around 6.8%. For used, the average jumps to 11.54%. Lenders charge more for used cars because they lose value faster, making them riskier.
For example, using an auto loan calculator, a $25,000 new car loan at 6% costs about $483 per month for 60 months. A $15,000 used car loan at 11% costs about $326 per month for 60 months. Even with the smaller loan, the interest paid is much higher.
Can You Refinance for a Better Auto Loan Rate?
Yes, you can. Loan refinancing is a smart option if your credit improves or if refinancing options for better rates appear in the market. For example, if you took a loan at 10% with a Subprime score and later move to Prime, refinancing could cut your rate to 6% or lower.
However, be careful. Some refinancing deals come with fees. Always compare the savings over the long term to make sure it’s worth it.
How Loan Terms (36, 60, 72 Months) Impact Your Rate
The length of your loan matters a lot. A loan term (36, 60, 72 months) changes both your monthly payment and your interest rate. Shorter terms usually have lower rates but higher payments. Longer terms lower the payment but increase total interest.
For example, Experian Automotive data shows that 36-month loans have the lowest average APR, while 72-month loans are more expensive. It’s tempting to stretch payments over six years, but that choice often costs thousands more.
What Is Considered a Bad Car Loan Rate?
A bad rate is one far above the average auto loan rates. If new car loans average 6.8% in 2025, then 12% or higher is a poor deal. This is often seen in prime vs. subprime auto loans where risky borrowers are charged much more.
High rates are also common in predatory loans. Be cautious with lenders who advertise guaranteed approval, since they often charge unfair auto loan APR that can trap you in debt.
Final Conclusion — Finding the Best Car Loan Rate for You
A good car loan rate in 2025 depends on who you are as a borrower. If your credit score is strong, you can expect rates around 5–7% for new cars. If your credit is weak, the rate will be higher, but you still have options like loan refinancing and credit union auto loans.
Always use tools like a monthly payment calculator / auto loan calculator to test different rates and terms. Check multiple lender offers & comparison shopping before signing anything. In the end, the best deal comes from being prepared, knowing your score, and never settling for the first offer you see.
FAQs About What Is a Good Car Loan Rate
What is a current good interest rate for a car loan?
A good car loan rate in 2025 typically falls between 5% and 7% for borrowers with strong credit.
What is a good interest rate for a 72 month car loan?
For a 72-month term, a competitive rate is around 6%–8%, depending on your credit score and lender.
Is 7% interest on a car loan high?
A 7% interest rate is considered average. It’s fair for nonprime borrowers but slightly high for prime or superprime.
How much is a $30,000 car loan for 60 months?
On a $30,000 loan at 6% APR for 60 months, your monthly payment is about $580.
How much is a $70,000 car payment for 72 months?
At 7% APR over 72 months, a $70,000 loan costs roughly $1,180 per month.
Is a 60 or 72 month car loan better?
A 60-month loan saves you on interest overall, while a 72-month loan lowers your monthly payment but costs more long term.
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