How to Get the Best Auto Loan Interest Rate
The interest rate you're able to get on a car loan plays a big part in how much you end up paying for a vehicle. Knowing how to get the best rate can make a difference on a large purchase.
As you can see from the sample rate sheet below, auto lenders place consumers into tiers based on their credit score. These tiers determine the auto loan interest rate you'll pay. How old the vehicle is, its mileage, where you live, and a few other factors can also influence the rate you're able to qualify for.
| Year & Terms | Sample Credit Union Rates | ||||||
|---|---|---|---|---|---|---|---|
| Model Year | Terms | Titanium 740+ |
Platinum 700 - 739 |
Diamond 660 - 699 |
Gold 620 - 659 |
Silver 580 - 619 |
Bronze 540 - 579 |
| 2010 & Newer | 1-60 61-72 73-84 |
1.99% 2.49% 2.99% |
2.49% 2.99% 3.49% |
3.49% 4.19% 4.69% |
7.29% 7.79% N/A |
12.99% 16.99% N/A |
16.29% N/A N/A |
| 2009 | 1-60 61-72 73-84 |
1.99% 2.49% 2.99% |
2.59% 3.29% 3.79% |
3.89% 4.49% 5.19% |
7.39% 8.39% N/A |
13.89% 17.89% N/A |
16.79% N/A N/A |
| 2008 | 1-60 61-72 73-75 |
2.39% 2.89% 3.39% |
3.09% 3.59% 4.09% |
4.49% 5.19% 5.69% |
7.69% 8.69% N/A |
14.39% N/A N/A |
16.99% N/A N/A |
| 2007 | 1-60 61-72 |
3.09% 3.59% |
3.89% 4.39% |
5.29% 6.29% |
7.79% 8.79% |
14.49% N/A |
17.09% N/A |
| 2006 | 1-60 | 3.69% | 4.39% | 6.39% | 9.29% | 14.59% | 19.99% |
| 2005 | 1-48 | 3.99% | 4.69% | 6.69% | 9.59% | 14.69% | 19.99% |
| 2004 | 1-36 37-48 |
5.49% 6.99% |
6.19% 7.69% |
8.19% 9.69% |
11.09% 12.59% |
14.99% 16.49% |
19.99% 19.99% |
You're more likely to get the best auto loan interest rates if you have a credit score of 740 or higher and finance a new car for a term of 60 months (five years) or less. Improving your credit score can result in you saving hundreds to thousands of dollars during the length of your auto loan.
Does Your Credit Score Affect Your Interest Rate?
Your credit score is the most important factor lenders consider when determining your auto loan interest rate. Car buyers with good credit can qualify for the best rates, while rates given to borrowers with bad credit will typically be higher.
You should know where you stand with your credit before applying for any loan or line of credit. This helps you know what to expect so you can make sure you get the same terms borrowers in similar credit situations typically qualify for.
How Much is Your Credit Score Costing You?
Borrowing money is more expensive when you have a poor credit score. The higher the auto loan interest rate, the more you'll pay in finance charges. The following chart is based on a $15,000 auto loan and shows how a lower credit score results in a more expensive loan.
| Sample Credit Score Cost (based on a $15k finance) | ||||||
|---|---|---|---|---|---|---|
| Credit Score |
Loan Term |
Sample Rate |
Payment | Total of Payments |
Monthly Credit Score Cost |
Total Credit Score Cost |
| 750 | 72 | 2.50% | $224.57 | $16,168.70 | $0 | $0 |
| 725 | 72 | 3.50% | $231.28 | $16,651.87 | $6.71 | $483.16 |
| 700 | 72 | 4.00% | $234.68 | $16,896.80 | $10.11 | $728.09 |
| 675 | 72 | 5.00% | $241.57 | $17,393.33 | $17.01 | $1,224.62 |
| 650 | 72 | 6.00% | $248.59 | $17,898.72 | $24.03 | $1,730.01 |
| 625 | 72 | 7.00% | $255.74 | $18,412.93 | $31.17 | $2,244.22 |
| 600 | 72 | 8.00% | $263.00 | $18,935.90 | $38.43 | $2,767.20 |
| 575 | 72 | 9.00% | $270.38 | $19,467.58 | $45.82 | $3,298.88 |
| 550 | 60 | 11.00% | $326.14 | $19,568.18 | $101.57 | $3,399.48 |
| 525 | 60 | 13.00% | $341.30 | $20,477.77 | $116.73 | $4,309.06 |
| 500 | 60 | 15.00% | $356.85 | $21,410.94 | $132.28 | $5,242.23 |
| 475 | 60 | 17.00% | $372.79 | $22,367.32 | $148.22 | $6,198.61 |
| 450 | 48 | 19.00% | $448.50 | $21,528.09 | $223.94 | $5,359.38 |
| 425 | 48 | 21.00% | $464.49 | $22,295.30 | $239.92 | $6,126.60 |
| 400 | 48 | 23.00% | $480.77 | $23,077.06 | $256.21 | $6,908.35 |
| None | 48 | 25.00% | $497.36 | $23,873.13 | $272.79 | $7,704.43 |
Compared to a borrower with an excellent 750 credit score, someone with a credit score of 600 will pay an additional $38.43 each month and $2,767.20 more over the length of the loan.
How to Improve Your Credit Score and Auto Loan Interest Rate
If you want to improve your credit score and get the best auto loan interest rate, you need to understand how it's determined. Most lenders use FICO scores when evaluating applicants. These five factors are used to calculate your FICO score:
- Payment History: 35%
- Amounts Owed: 30%
- Length of Credit History: 15%
- Credit Mix: 10%
- New Credit: 10%
To improve your credit, the two most important things you can do are pay all your bills on time and reduce your credit card balances. You should also get current on any outstanding bills, not close or open any accounts, and check your credit reports regularly.
You're encouraged to keep an eye on your credit reports because it's not uncommon for them to have errors. You should review your reports from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) and dispute any errors you find.
There are two ways to do this: you can either do it yourself or hire a professional to help. For those that choose to do it alone, we've included links so you can initiate an online dispute with each of the three credit bureaus:
For those who want a helping hand, a professional credit repair company may be able to identify more items to dispute and will know the best way to handle unique circumstances. Click here to receive a no-obligation quote, or call 888-286-5211 for a free legal consultation.
If You're Happy with Your Credit Score
It's true that getting an auto loan can help you improve your credit score if you make every payment on time. CarPaymentsUnder.com wants to help you find financing. Select the score closest to yours below to view used cars and payment options.
If your credit score is less than 625, we recommend that you request an auto loan before shopping online for a used car. Our network of dealers has the lending resources to help people in many challenging credit situations.