By Ben LuthiCar Loans for Fair Credit: Rates and Trends for 2025
Quick Answer
The average car loan interest rate for fair credit is 9.59% for new cars and 14.46% for used cars. Understanding your options can help you improve your chances of securing favorable terms.
You can qualify for a car loan with fair credit, but your options may be more limited and your costs higher compared to someone with good or excellent credit.
If you're thinking about applying for a car loan with fair credit, here's what you need to know about current interest rates and trends.
New car loans typically offer lower interest rates, primarily because new vehicles are less of a risk for lenders. But while you can get better terms on a new car, you can expect a larger monthly payment due to higher loan amounts for more expensive vehicles.
Whether you're thinking about buying a new car or a used one, here's a look at some of the terms you can generally expect with a car loan for fair credit on average, according to Experian's State of the Automotive Finance Market report from the fourth quarter (Q4) of 2024.
| Category | New Cars | Used Cars |
|---|---|---|
| Monthly payment | $775 | $530 |
| Loan amount | $43,405 | $25,187 |
| Interest rate | 9.59% | 14.46% |
| Loan term | 74.27 | 68.07 months |
Source: Experian data as of Q4 2024; VantageScore® 4.0 used
Most People With Fair Credit Buy Used Cars
Roughly 75% of people with near prime ("fair") credit scores choose to buy a used car over a new one. Because lower credit scores typically translate to higher loan interest rates, a used car with a lower sales price can help fair credit borrowers keep costs down.
That said, fewer people with fair credit bought used cars in 2024 than in previous years, according to Experian data, indicating that more are willing to take on a higher monthly payment in exchange for the new car experience.
Share of Used Vehicle Financing by Credit Score
Current Auto Loan Interest Rates by Credit Score
Your credit score has a significant impact on the interest rate you get with a car loan. Borrowers with lower credit scores are statistically more likely to default on their payments, and lenders charge higher rates as compensation for the risk.
That said, you can increase your chances of securing a lower interest rate by improving your credit. With Experian, you can get free access to your Experian credit report and FICO® Score☉. These resources can help you assess your credit health and determine which steps you can take to bolster your credit score.
To give you some context on car loan interest rates, here are the average rates by credit score:
| Credit Score Range | New Car APR | Used Car APR |
|---|---|---|
| Super prime (781 or above) | 4.77% | 7.67% |
| Prime (661 - 780) | 6.40% | 9.95% |
| Near prime (601 - 660) | 9.59% | 14.46% |
| Subprime (501 - 600) | 13.08% | 19.38% |
| Deep subprime (300 - 500) | 15.75% | 21.81% |
Source: Experian data as of Q4 2024; VantageScore 4.0 used
How to Get an Auto Loan With Fair Credit
Getting approved for an auto loan with fair credit can be a little challenging, but it's far from impossible. While some lenders may be unwilling to work with you, you can improve your chances of approval—and possibly even better interest rates—with the following tips:
- Buy a cheaper car. Even with higher average interest rates, used cars can offer lower monthly payments compared to used cars. You may also have an easier time getting approved for a used car loan since the average credit score for a new car loan is 755, according to Experian data.
- Make a larger down payment. Putting more money down directly reduces the amount you need to borrow, which helps minimize the risk for the lender. What's more, a larger down payment may help you qualify for a lower rate. If you currently own a car and have positive equity, you may be able to trade it in and use the proceeds as your down payment.
- Get a cosigner. When you apply with a creditworthy cosigner, the lender will consider both your credit and financial profiles. This may improve your approval odds and help you qualify for a lower rate than what you could get on your own. Just be sure to discuss your cosigner's responsibilities before moving forward.
- Shop around. While it may be convenient to have the dealer arrange financing on your behalf, you may be able to get better terms by shopping around on your own. More specifically, take the time to get preapproved with at least three lenders so you can compare rates, repayment terms, monthly payments and other features that are important to you.
How Loan Amounts Affect Total Interest Paid
As previously mentioned, buying a less expensive car can help you minimize your monthly payment and overall interest charges, even with a higher interest rate.
For example, let's take a look at what you'd pay with a 60-month loan for $12,000 at a 14.46% interest rate, compared to the average loan amount for fair credit borrowers:
| Loan Amount | Monthly Payment | Total Interest Paid | Total Amount Paid (60-Month Term) |
|---|---|---|---|
| $25,187 | $592.08 | $10,337.88 | $35,524.88 |
| $12,000 | $282.09 | $4,925.34 | $16,925.34 |
As you can see, taking on roughly $13,000 less debt can save you nearly $20,000 in total costs. You can use Experian's car payment calculator to run the numbers for your particular situation.
Car payment calculator
How to Improve Your Credit Score
The steps you take will depend on your unique credit profile. With that said, here are a few potential options:
- Pay on time. Make it a priority to pay all of your bills on time. This may include catching up on past-due payments and paying off collection accounts.
- Pay down credit card balances. Reducing your credit card debt can lower your credit utilization rate, which is the percentage of available credit you're using at a given time. Lower utilization rates are correlated with higher credit scores.
- Minimize unnecessary credit applications. Each time you apply for credit, you may undergo a hard inquiry, which can knock a few points off your credit score. Multiple hard inquiries over a short period of time, however, can have a compounding effect on your credit.
- Become an authorized user. When someone with good credit adds you as an authorized user on one of their credit cards, the full history of the account will be added to your credit reports, potentially helping your credit score.
- Get credit for other payments. Experian Boost®ø is a free feature that allows you to add alternative payments to your Experian credit file, such as rent, utilities, phone bills and select subscriptions. Adding these on-time payments may help increase your FICO® Scores based on Experian data.
The Bottom Line
Understanding how your credit affects auto loan rates is key to finding the best deal, especially if you have fair credit. As you explore your financing options, take steps to build and maintain a healthy credit profile, consider lowering your budget and put down more money on your purchase. With free credit monitoring from Experian, you can track your progress, spot issues early and work toward better loan terms in the future.
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About the author
Ben Luthi
Ben Luthi has worked in financial planning, banking and auto finance, and writes about all aspects of money. His work has appeared in Time, Success, USA Today, Credit Karma, NerdWallet, Wirecutter and more.
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