Used Car Loan Rates for February 2025

Used Car Loan Interest Rates by Credit Score

The interest rate you receive on a used auto loan is based on several factors, including your credit score. A lower credit score indicates a greater statistical likelihood of defaulting on a loan, which may cause lenders to charge a higher rate to compensate for this risk.

Here's a look at the average used car interest rates for each credit score tier and how they've changed since 2023:

Source: Experian State of the Automotive Finance Market report from Q3 2024; scores calculated using VantageScore^® 4.0

Used Car Loan Interest Rate Trends

Used car loan interest rates have increased over the past couple of years. For comparison, the average rate was 9.38% in Q3 2022, compared with the current average of 11.74% as of Q3 2024.

The average used car loan rate is up since the same quarter in 2023 across all credit scores, with subprime and near prime borrowers seeing the biggest rate impact.

Where Do People Get Their Used Car Loan?

Car buyers may have several choices when it comes to getting an auto loan. Depending on your situation, options may include the following:

• Direct financing: With a direct auto loan, you're applying directly with a bank, credit union or online lender. With this option, you can get preapproved with multiple lenders to improve your chances of securing the best deal.
• Indirect financing: Anindirect auto loan involves having a dealer arrange financing on your behalf. Dealers typically shop your credit application to roughly five lenders and choose one offer to present to you. Although dealer-arranged financing can be more convenient, it could result in a higher interest rate due to dealer markups.
• Captive financing: If you're buying a certified pre-owned vehicle, you may be able to obtain a loan from the manufacturer's lending arm, also known as a captive lender.
• Buy here, pay here (BHPH) financing: A BHPH loan is a type of in-house financing offered by dealers that specialize in working with bad-credit borrowers. Just keep in mind that these loans can be incredibly expensive, and your positive payment history may not be reported to the credit bureaus.

Here's a look at where car buyers typically get their loans based on the type of dealer they're working with:

Used Car Loan Origination Share by Lender Type and Dealer Type

Monthly Payment Calculator

The average monthly payment for a used car loan is $520, according to Experian data. In spite of higher interest rates, that's down from $538 in 2023 and $529 in 2022. The average used car loan term is 67.15 months, which is also down slightly from the past two years.

Calculating your estimated monthly payment before you apply for an auto loan is crucial for assessing whether the purchase fits your budget. With a few assumptions, you can calculate your monthly payment using the following calculator:

Car payment calculator

What Affects Auto Loan Rates?

Auto lenders consider a variety of factors when determining interest rates. Here are some of the more prominent elements:

• Market conditions: Lenders consider various economic factors, including the federal funds rate and the 10-year Treasury note yield, to determine the general rates they offer to prospective borrowers.
• Credit score: While there's no universal minimum credit score requirement to obtain an auto loan, higher credit scores are correlated with lower interest rates.
• Income: In addition to your total annual income, lenders will look at your debt-to-income ratio, which indicates how much of your gross monthly income goes toward debt payments.
• Loan type: On average, used car loans carry higher interest rates than new car loans, even for buyers with stellar credit scores. This is primarily due to the fact that used cars are more likely to break down, impacting the lender's investment.
• Loan amount: Higher loan amounts typically command higher interest rates.
• Down payment: Putting money down on your purchase reduces the risk to the lender, resulting in a lower rate.
• Loan term: While shorter repayment terms result in higher monthly payments, they can offer lower interest rates.

How to Get the Best Used Car Loan Rate

While there's nothing you can do about market conditions, you can take several steps to improve your chances of securing favorable terms for your upcoming used car purchase.

Shop Around

Lenders offer different rates and eligibility requirements, so it's important to get preapproved with at least a few to get a sense of which one can offer you the best deal. It may even help to compare your preapproval offer to an offer provided by a dealership.

Improve Your Credit Score

Building credit can take time, but if your need for a new vehicle isn't urgent, the potential interest savings can be well worth the effort and patience.

Start by registering with Experian to get free access to your Experian credit report and FICO^® Score^☉. These valuable resources can give you an idea of where you stand, as well as insights into which areas you need to address.

Trade In a Car

If you currently own a vehicle with positive equity—meaning it's worth more than you owe—trading in the vehicle can help reduce the amount you need to borrow with your next car. Before you head to the dealership, use a website like Kelley Blue Book or J.D. Power to get an estimate of the vehicle's value. You may also consider selling the car yourself instead of trading it in and putting the proceeds toward your new loan.

Put More Money Down

The more cash you put down, the lower your starting loan balance will be. This can not only reduce your monthly payments but also potentially qualify you for a lower interest rate on the loan.

Opt for a Shorter Loan Term

If you can afford a higher monthly payment, a shorter term can help you secure a lower interest rate and also reduce your total interest charges.

How to Get a Used Car Loan

Before you start shopping for a used car, take these steps to secure your financing and make sure you get the best possible deal.

1. Check Your Credit Score

Checking your credit score can help you evaluate your credit health and give you details about how to improve your credit, if needed. If you don't have time to increase your score, checking your credit can give you a general idea of what your interest rate might look like.

2. Determine Your Budget

Take a look at your current budget—or make a new budget if you don't already have one—to get a feel for what you can afford to pay each month. With that information in hand, you can use an online car payment calculator to determine how much you can afford to borrow in terms of the sales price and down payment.

3. Get Preapproved

Once you're ready to get started, go through the preapproval process with at least three lenders to compare interest rates, repayment terms and other features that are important to you.

To get preapproved, you'll typically need to provide some information about yourself, your income and employment, your residential status and monthly payment, and your desired loan amount and term.

The hard inquiry associated with an auto loan preapproval can have a small, temporary negative effect on your credit. If you submit all your applications for preapproval within a short period of time (less than two weeks), you will minimize the negative impact of your preapproval applications.

4. Compare Offers

After completing the preapproval process, you can compare your offers to determine the best one. Keep in mind that preapproval doesn't guarantee final approval, including the terms.

5. Head to the Dealership

After choosing the best offer, you can head to the dealership to choose the used model you want. You may even decide to submit another credit application to get more offers you can compare with the best one you found.

6. Finalize the Loan

When you're ready to buy, you'll finalize the loan by providing additional details, such as a copy of your government-issued photo ID, pay stubs, proof of insurance and proof of residence, such as a utility bill.

If you're approved, the lender will provide a loan agreement, which you should read through before signing. Depending on the lender, they may choose to pay the dealer directly or issue a check to you that you can use to pay and complete the purchase.

How to Get a Car Loan With Bad Credit

Getting an auto loan with bad credit can be challenging, but it's not impossible. Some potential ways to make up for less-than-stellar credit include:

• Shop around. Before resorting to BHPH financing, research online lenders that may be willing to work with you and provide more favorable terms.
• Making a larger down payment. The more money you put down, the more you're showing the lender that you're serious about keeping the car and paying your bills on time.
• Get a cosigner. If you have a family member or friend with solid credit, consider asking them to cosign the loan. The lender will consider both credit and financial profiles to make a decision.

The Bottom Line

Used car loan interest rates have been on the rise in recent years, and they may not decrease significantly anytime soon. However, there are steps you can take to maximize your interest savings on a car loan.

Throughout the car-buying process, it's a good idea to monitor your credit regularly to track your progress and address potential problems that could impact your loan eligibility and interest rate.