Average car loan interest rate for 650 credit score

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• The average new-car interest rate was 4.07%, and used-car rates averaged 8.62% in the first quarter of 2022, according to Experian. 
• Interest rates are largely based on credit score, whether the car is new or used, and loan terms.
• The average rates dropped since the first quarter of 2021, down from 4.15% for new and 8.82% for used.
• Compare up to four auto loan offers with our partner, myAutoLoan »

The average auto loan rate for a new car was 4.07% in the first quarter of 2022, while the typical used-car loan carried an interest rate of 8.62%, according to Experian's State of the Automotive Finance Market.

That's down slightly from 4.15% for new and 8.82% for used-car loans during the same period a year earlier.

Dealers calculate your interest rate with many factors in mind, including your credit score, the type of car you're buying, and where you live. Auto loans can be found through a dealership, or by gathering pre-approvals from institutions you'd like to work with, such as banks, credit unions, or independent lenders.

Experian's data shows the two biggest factors on your auto loan's interest rate are your credit score and whether you're buying a new or used car.

Average interest rates by credit score type for new and used car purchases

Average monthly payment by credit score

The higher your credit score, the less it will cost to borrow

Credit scores are a numerical representation of your credit history. They function as a grade for your borrowing history ranging from 300 to 850, and include your borrowing, applications, repayment, and mix of credit types on your credit report. Companies use credit scores to determine how risky they think lending to you would be.

A lower credit score makes borrowing more expensive. In the data above, the cheapest borrowing rates went to people with the best credit scores. Meanwhile, those with the lowest credit scores paid about 10 percentage points more to borrow than those with the highest scores.

The interest rate also has a big effect on monthly payment. Using Bankrate's auto loan calculator, Insider calculated how much a borrower paying the average interest rate would pay for the same $30,000, 48-month new car auto loan:

With the interest rate as the only factor changed, a person with a credit score in the highest category will pay $656 a month, while a person with a score in the lowest category would pay $831 a month, or $175 more for per month for the same car.

Average interest rates for used cars vs. new cars

Buying used could mean higher interest rates

Buying a new car may be more expensive, all in all, than buying used. But, new and used auto loan interest rates are significantly different, no matter your credit score. Based on Experian data, Insider calculated the difference between new and used interest rates. On average, used car financing costs about four percentage points more than new financing. 

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The gap between how much more a used car costs to finance shrinks as credit scores increase, but even for the best credit scores, a used car will cost over 1% more to finance than a new car. 

Used cars are more expensive to finance because they're a higher risk. Used cars often have lower values, plus a higher chance that they could be totaled in an accident and the financing company could lose money. That risk gets passed on in the form of higher interest rates, no matter the borrower's credit score. 

Average interest rates by loan term

Loans under 60 months have lower interest rates for new cars

Loan terms can impact on your interest rate. In general, the longer your term, the higher your interest rate is.

After 60 months, your loan is considered higher risk, and there are even bigger spikes in the amount you'll pay to borrow. The average 72-month auto loan rate is almost 0.3% higher than the typical 36-month loan's interest rate for new cars. That's because there is a correlation between longer loan terms and nonpayment — lenders worry that borrowers with a long loan term ultimately won't pay them back in full. Over the 60-month mark, interest rates jump with each year added to the loan.

Data from S&P Global for new car purchases with a $25,000 loan shows how much the average interest rate changes:

Data from S&P Global for used car purchases with a $25,000 loan shows how much the average interest rate changes:

While there's a direct correlation between a longer repayment term period and a higher interest rate with new cars, it's not the case with used cars. It is unclear exactly why these rates dip with longer repayment terms. 

It's best to keep your auto loan at 60 months or fewer, not only to save on interest, but also to keep your loan from becoming worth more than your car, also called being underwater. As cars get older, they lose value. It's not only a risk to you, but also to your lender, and that risk is reflected in your interest rate. 

Average interest rates by lender

The lender you use makes a difference

When you start shopping for auto loans, you'll find that the lender you choose does make a difference. Here are the starting interest rates from several different lenders for both new and used cars. 

Banks set their minimum auto loan borrowing rates independently, so it's important to shop around and compare offers to see what's best for you. Get pre-approvals from several different lenders, and compare the APRs and monthly payments to find the offer best suited for you. 

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