Auto loans can be an excellent way to finance a new vehicle purchase, but due to the short loan terms and high interest rates car buyers may end up paying more than necessary. With some careful planning, you might be able to save yourself some money in the long run.

The “car loan interest calculator” is a website that can help you figure out how much your car loan will cost you.

Are you paying too much interest on your car loan?

Used car loan interest rates are often higher than new car loan interest rates. The average new car loan rate for vehicles financed in the fourth quarter of 2021 was 3.86 percent, compared to 8.21 percent for used vehicle car loans.

In recent years, typical auto loan rates for new and used automobiles have progressively declined. According to Experian, rates for new auto loans were 4.3 percent in Q4 2020, and 8.41 percent for used vehicle loans.

Consumers with strong credit ratings are more likely to qualify for reduced interest rates than those with poor credit. We’ve broken down how your personal creditworthiness affects the average vehicle loan rate in the table below.

Is the purpose of a loan important?

Martin-dm contributed this image.

What Does Interest Rate Mean?

Interest-calculator

An interest rate is the cost of borrowing money from a lender. An annual percentage rate, or APR, is often used to indicate the rate. For prime and super-prime borrowers, fixed rates of interest as low as 0% are possible.

Borrowers of auto loans are liable for repaying their main loan amount as well as any interest and fees accrued over the loan’s term. The principle is the amount borrowed, and interest is a financial charge added on top of it.

Your interest rate has a significant influence on the amount of money you pay back over the course of a loan. For example, if you took out a five-year $25,000 loan with a 2.5 percent interest rate to purchase a new automobile, you’d spend $1,621.04 in interest over the course of the loan.

You’d pay $4,349.22 in interest over the life of the loan if you took out the identical loan with a 6.5 percent interest rate.

An vehicle loan with a 0% interest rate has no interest. To qualify for a 0% APR, a borrower must have high or exceptional credit.

Because your interest rate has such a large impact, getting the best rate possible is critical.

Zerbor/istock contributed this image.

What Factors Affect Average Auto Loan Rates?

apr-car-dealership

The interest rate a lender may charge for a car loan or refinancing is determined by many criteria, including the borrower’s credit score, loan amount, and payback duration.

Your credit score is a numerical representation of your credit history, which is a record of your obligations and payments made and missed. In general, lenders will give you greater interest rates if your credit is good.

The average score ranges from 300 to 850, with 850 being the highest. The majority of customers have a credit score between 600 and 750. In the fourth quarter of 2021, borrowers had an average credit score of 728 for new automobile auto loans, according to statistics.

Your credit score is used by lenders to determine how risky it is to give you money.

Lower scores indicate that you have trouble managing your debts and may be at risk of missing payments. Lenders frequently charge a higher interest rate to compensate for this risk. In Q4 2021, new automobile purchasers with credit scores of 300 to 500 had an average rate of 12.53 percent, compared to 2.47 percent for those with credit scores of 781 to 850. According to Experian’s statistics, the average used automobile loan rate was 19.87 percent for deep subprime borrowers and 3.61 percent for super-prime borrowers.

isockphoto/ SergeyTikhomirov

Interest Rates and Loan Terms

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The interest rate you’ll be charged and how much you pay during the life of the loan are both affected by the loan length. Short-term loans normally have larger monthly payments, but you’ll pay less in interest over the course of the loan.

Longer periods mean more months of interest payments, which increases the total amount you pay over time. Furthermore, higher interest rates are anticipated to accompany longer durations. Using Experian data from Q4 2021, see the graphic below for a more extensive look at the link between credit score, terms, and new auto loan rates.

Lantern Credit To SoFi for the image.

How Do Interest Rates for New and Used Cars Differ?

apr-car-used

One of the most important aspects in deciding the interest rate on a car loan is whether you purchase a used or new vehicle.

Because used automobiles pose a larger risk to lenders, who want you to use the cars as security, used car financing frequently has a higher interest rate.

The average interest rate for used automobiles in the fourth quarter of 2021 was 8.21 percent, with a loan length of 67.36 months.

To put things in perspective, the average interest rate on new autos was 3.86 percent, with a payback duration of 69.66 months.

Sakkawokkie/ istockphoto contributed to this image.

Interest Rates Averaged by Term Length

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As previously said, short-term loans entail larger monthly payments, but you will likely pay less in interest throughout the loan’s duration. In the fourth quarter of 2021, the average new automobile loan period was 69.66 months, with an average interest rate of 3.86 percent.

In Q4 2021, the average interest rate for used vehicle auto loans was 8.21 percent, with an average period of 67.36 months. Borrowers are assigned to one of five risk categories by Experian: deep subprime, subprime, nonprime, prime, or super prime. In Q4 2021, super-prime borrowers had the lowest duration and interest rate of the five risk categories, with an average new automobile loan term of 64.29 months and an average rate of 2.47 percent.

In Q4 2021, nonprime borrowers with credit scores ranging from 601 to 660 had the longest average new auto loan payback duration among the five risk groups. Their average term was 74.33 months, with a 6.07 percent average rate.

Depositphotos provided the image.

Average Auto Loan Interest Rates for Good Credit

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Using Experian and RateGenius data, below are the typical loan rates for super prime borrowers with exceptional credit scores as of Q4 2021:

  • Super prime is a high-risk category.
  • 781–850 credit score
  • 2.47 percent is the average new automobile loan rate.
  • 3.61 percent is the average used automobile loan rate.
  • 3.73 percent (credit score 750+) is the average car refinancing interest rate in October 2021.

Depositphotos provided the image.com.

Auto Loan Interest Rates for Good Credit

credit_score

Using Experian and RateGenius data, below are the typical loan rates for super prime borrowers with high credit scores as of Q4 2021:

  • Prime danger level
  • 661–780 credit score
  • 3.51 percent is the average new automobile loan rate.
  • 5.38 percent is the average used automobile loan rate.
  • In October 2021, the average car refinancing interest rate was 4.30 percent (credit score 700–749).

cnythzi contributed this image.

Rates on Auto Loans for People with Bad Credit

iStock-865631640

Using Experian and RateGenius data, below are the typical loan rates for customers with fair credit scores as of Q4 2021:

  • Nonprime/near prime risk category
  • 601–660 credit score
  • 6.07 percent is the average new automobile loan rate.
  • The average APR on a used automobile loan is 9.80%.
  • 5.74 percent (credit score 640–699) (average car refinancing interest rate in October 2021).

courtesy of istockphoto/demaerre.

Average Bad Credit Auto Loan Rates

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Using Experian and RateGenius data, below are the typical loan rates for poor credit applicants in Q4 2021:

  • Category of risk: subprime
  • 501–600 credit score
  • 9.41% is the average new automobile loan rate.
  • 15.96% is the average interest rate on used automobile loans.
  • In October 2021, the average car refinancing interest rate was 9.03 percent (credit score under 640)

Depositphotos provided the image.com.

Rates for Deep Subprime Auto Loans on Average

Cadillac-Escalade-dealership-most-searched-luxu

Using Experian and RateGenius data, below are the typical loan rates for deep subprime borrowers as of Q4 2021:

  • Deep subprime is a high-risk category.
  • 300–500 credit score
  • 12.53 percent is the average new automobile loan rate.
  • 19.87 percent is the average used automobile loan rate.

Image courtesy of jetcityimage/istockphoto.

How to Refinance an Auto Loan at a Low Interest Rate

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Shopping around and comparing offers is the first step in acquiring a decent car loan refinancing rate. For vehicle loan refinancing, banks, credit unions, and internet lenders may provide varying terms and conditions.

If your credit score has improved since you took out your vehicle loan, you may be eligible for a lower interest rate if you refinance. Consider extra expenditures like as fees and prepayment penalties, as well as the temporary impact on your credit score, while assessing the advantages of refinancing.

Depositphotos provided the image.com.

The Conclusion

happy_new_car

The best average vehicle loan interest rate in the first quarter of 2021 was 2.41 percent, but it only applied to persons with the strongest credit ratings. Depending on your financial situation, you’ll be given different interest rates. If you have excellent credit and can put down a large down payment, you may be eligible for the lowest interest rates available. If you don’t, there are actions you may do to assist you get the greatest possible interest rate.

More information:

MediaFeed.org syndicated this story, which first published on LanternCredit.com.

The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi’s Lantern:

SoFi Lending Corp., a lender regulated by the California Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636, owns the Lantern website. (www.nmlsconsumeraccess.org)

All prices, fees, and conditions are provided “as is” and are subject to change at the discretion of each supplier. There is no assurance that you will be accepted or that you will be eligible for the stated rates, fees, or terms. The particular terms you’ll get are determined by criteria such as the perks you’ve requested, your credit score, use, and history, among others.

*Check your rate: Lantern and/or its network lenders do a soft credit pull to see what rates and conditions you qualify for. This does not effect your credit score. If you pick a product and proceed with your application, the lender(s) you choose will request your complete credit report from one or more consumer reporting agencies, which is referred to as a hard credit pull and may have an impact on your credit.

All loan conditions on this page, including interest rate, Annual Percentage Rate (APR), and monthly payments, are from lenders and are estimations based on the minimal information you supplied. They are offered for informational reasons only. As required by the Truth in Lending Act, the estimated APR includes all applicable costs. The conditions of your loan, including the APR, will be determined by the lender you choose, their underwriting requirements, and your particular financial circumstances. The lenders, not SoFi Lending Corp. or Lantern, supply the loan terms and rates shown. For further information, please read the terms and conditions of each lender.

Many things influence your credit scores and potential interest rates. SoFi does not qualify as a credit repair organization under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services, guidance, or help with “rebuilding” or “enhancing” your credit record, credit history, or credit rating. Visit the FTC’s credit page for further information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Individual Loan:

This Personal Loan product is operated by SoFi Lending Corp. (“SoFi”) in collaboration with Even Financial Corp. (“Even”). Whether you make a loan enquiry, SoFi will send your information to Even, which will then send it to its network of lenders/partners to see if you qualify for pre-qualified or pre-approved offers. Your credit information will be obtained from a credit reporting agency by the lenders/partners that get your information. Pre-qualified and pre-approved offers from one or more lenders/partners will be given to you here on the Lantern website if you fulfill one or more lender’s and/or partner’s eligibility requirements. More information about Even, the procedure, and its lenders/partners may be found on the loan enquiry form, which can be found on our Personal Loans and Student Loan Refinance pages. Learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy by clicking the links below.

The APR on personal loans offered to Lantern consumers does not exceed 35.99 percent. A $10,000 personal loan with a 36-month term and a 10% interest rate would cost $11,616.12 over the course of the loan’s 36 months.

Refinancing Student Loans:

This Student Loan Refinance program is operated by SoFi Lending Corp. (“SoFi”) in collaboration with Even Financial Corp. (“Even”). Whether you make a loan enquiry, SoFi will send your information to Even, which will then send it to its network of lenders/partners to see if you qualify for pre-qualified or pre-approved offers. Your credit information will be obtained from a credit reporting agency by the lender receiving your information. Pre-qualified and pre-approved offers from one or more lenders/partners will be given to you here on the Lantern website if you fulfill one or more lender’s and/or partner’s eligibility requirements. More information about Even, the procedure, and its lenders/partners may be found on the loan enquiry form, which can be found on our Personal Loans and Student Loan Refinance pages. Learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy by clicking the links below.

Lantern’s student loan refinancing loans are private loans that do not include debt forgiveness or repayment choices accessible under the federal loan program, such as Income Based Repayment, Income Contingent Repayment, or Pay as You Earn (PAYE).

Due to recent legislative developments, all federal student loan payments have been stopped and interest rates on federally owned loans have been forgiven until August 31, 2012. Please carefully evaluate these changes before refinancing federally held loans, since you will no longer be eligible for these or other future federally held loan advantages if you do so.

Refinancing a Car Loan:

Caribou provided the information about auto refinancing loans to this Lantern page. The auto loan refinance information on this Lantern site is indicative and is contingent on you meeting the lender’s requirements, which include meeting the lender’s credit standards, having a loan amount of at least $10,000, and having a vehicle that is no more than 10 years old with no more than 125,000 miles on the odometer. The loan rates and conditions shown on this Lantern site are subject to change after you contact the lender, and may vary depending on your creditworthiness. Additional terms and restrictions may apply, and all terms may differ depending on where you live.

Disclosure of Secured Lending:

Terms and conditions apply, as well as state limits and minimum loan amounts. We recommend that you carefully examine if a secured loan is the correct option for you before applying. If you default on a secured personal loan, you risk losing the assets you pledged as security. Not all borrowers will be eligible for greater loan amounts or the best lending conditions. The capacity to fulfill underwriting standards (including, but not limited to, a respectable credit history, adequate income after monthly costs, and collateral availability) that vary by lender determines loan acceptance and conditions.

 

Insurance for life:

SoFi Life Insurance Agency, LLC provides insurance information on Lantern. To see our licenses, go here.

Martin-dm contributed this image.

MediaFeed has more.

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Depositphotos provided the image.com.

AlertMe

The “why is my car loan apr so high with good credit” is a question that many people ask. The answer to this question is the APR, which stands for Annual Percentage Rate. APR can be calculated by dividing the total cost of your loan by its term.

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  • average car loan interest rate by credit score
  • how does interest work on a car loan
  • what is the highest interest rate on a car loan by law
  • how does your credit score influence the price you pay for a new car?
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