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What is a Good Interest Rate for a Car Loan?

If you’re in the market for a new vehicle and are thinking of financing it, you’re probably wondering what is a good interest rate for a car loan. Honda North is here to help! The average interest rate on a car loan varies based on credit score. Below you can learn the average interest rate for a new and used car based on credit score. When you’re ready to take the next step, chat with the finance center at Honda North in Danvers.

New and Used Car APR by Credit Score

Average Credit Score Annual Percentage Rate Used Car Loan Annual Percentage Rate New Car Loan
780 or better 3.8% 3.17%
661-780 5.48% 4.03%
601-660 6.79% 10.1%
501-600 10.98% 16.27%
500 or less 13.76% 19.32%

What Factors Impact the APR on Your Car Loan?

Now that you know what is a good car loan rate, you might be wondering what is the average interest rate on a car loan and what impacts it. The average interest rate goes up and down based on the Prime rate set by the Feds. In terms of your individual interest rate, it depends on your creditworthiness. Some factors that can cause a low credit score (and therefore a higher interest rate) are things like being late on loan payments, having too much debt, or having debts in collection. These types of issues could be an indication that the borrower has trouble managing their money and meeting their financial obligations.

The Type and Length of Loan Impacts Your APR

The type of loan also influences the interest rate on your auto loan. Used car loan interest rates are generally higher than new car rates for a number of reasons. The first reason is that the car has begun to depreciate, and that decreases its value around Lynn. In addition, the older the auto, the more difficult it is to obtain financing. Finally, when the dealership takes in a used car on trade they know they typically have to invest money into the vehicle for repairs on top of the money that they spent to acquire it.

The length of the auto loan you want also impacts the APR on your loan. The longer the loan term the higher the interest rate, but you’ll also likely have lower monthly payments. A higher interest rate loan helps the auto loan lender get more of their money back sooner, in the event the buyer defaults on the loan.

Apply for Financing at Honda North Today

Now that you understand what is a good interest rate for a car loan, let the finance experts at Honda North help you through the financing process. They will treat you with respect and patiently answer all of your questions. Head into the dealership to see our extensive inventory of new and preowned Honda models and take a look at more helpful auto finance tips on how you can lease a used car. let’s go for a test drive around Burlington or Lawrence. Contact us today!

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