What is the average interest rate on an auto loan?
How to know if you’re getting a good rate when financing your new car
Buying a car is a lot of money, whether it’s a new or used vehicle. So, you don’t want to pay more than what you have to pay on the monthly interest. When you finance your loan, make sure you get a competitive interest rate. How can you determine this? Compare it to the national average APR and consider your credit history.
Do you have questions about financing a car? Here is a helpful FAQ to explain the process
How do you know if you are offered a good APR?
According to ValuePenguin data as of October 2020“The national average auto loan interest rate in the United States is 5.27% on 60-month loans. “
Let’s put this in perspective. If you financed a new car for $ 25,000 at 5.27% for 60 months, you would pay about $ 3,500 in interest over the life of the loan. That’s $ 58 more each month on top of your normal principal payment.
If you repay your car loan in advance, however, you will not have to pay this full interest cost.
This average can fluctuate significantly from year to year depending on the economy, so use this metric only as a general guide. You can generally consider the rates of around 2-4% to be competitive, while the rates of around 7-8% are a bit high and all around or above 10% is very high.
However, you cannot be sure that you are getting a low or medium rate as there are many factors that determine what rate the bank / lender will offer you. In addition to market influences, the interest rate takes into account your income, existing debt, loan term, credit history, down payment, and the vehicle itself.
The best you can do to secure a competitive APR on your next car loan is to manage your finances well, build your credit history, and shop around to assess all of your options.
Thinking of buying a used luxury car? Make sure you read this guide first!
Aaron isn’t ashamed to be a Clevelander native and the proud driver of a Hyundai Veloster Turbo (which recently replaced its 1995 Saturn SC-2). He happily uses his experience in theater, literature and communication to dramatically recite his own articles to local youth. Mr. Widmar happily resides in Dayton, Ohio with his beautiful wife, Vicki, but is often on the road with her exploring new destinations. Aaron has high aspirations for his writing career, but is often distracted by the deep nature of the human condition and forgets what he was writing … See more articles from Aaron.