Your credit score affects the interest rate that you qualify for when you get an auto loan. If you have bad credit, you’re very likely to get a higher interest rate than those with good credit. The average interest rate can also depend on whether you’re financing a new or a used car.
We’ll go over the average interest rates for both new and used vehicles so you can estimate your possible interest rate before you walk into a dealership.
Average Interest Rates on New Cars
Your credit score places you in a tier that lenders use to determine the interest rate and other terms for an auto loan. New cars have lower interest rates because they’re covered under warranty, are more reliable, and lenders know their market value. There’s no guessing on the condition of a new vehicle, because it’s brand new!
Here are the average interest rates on auto loans for new cars at the end of 2019, according to the State of the Auto Finance Market report from the credit bureau Experian:
| Credit Score Tier | Average Interest Rate for a New Car Loan |
| Super Prime – 781 to 850 | 3.82% |
| Prime – 661 to 780 | 4.75% |
| Nonprime – 601 to 660 | 7.55% |
| Subprime – 501 to 600 | 11.51% |
| Deep Subprime – 300 to 500 | 14.25% |
Average Interest Rates on Used Cars
Used cars generally come with higher interest rates than new cars. This is because most used vehicles are no longer covered under warranty, and it can be difficult to gauge their exact value. Used cars also have higher mileage, more wear and tear, and are generally less reliable than new vehicles.
While the interest rate may be higher on a used car loan, the amount you finance is likely to be lower due to depreciation.
Here are the average interest rates on auto loans for used vehicles at the end of 2019, according Experian’s report:
| Credit Score Tier | Average Interest Rate for a Used Car Loan |
| Super Prime – 781 to 850 | 4.43% |
| Prime – 661 to 780 | 6.15% |
| Nonprime – 601 to 660 | 10.85% |
| Subprime – 501 to 600 | 16.88% |
| Deep Subprime – 300 to 500 | 19.81% |
Your Credit Score and Auto Financing
Keep in mind, these are simply average interest rates. If your credit score falls within a certain tier, there’s no guarantee that you’ll get that exact rate. Car buying doesn’t have very many hard-and-fast rules, because every lender, vehicle, dealership, and individual’s situation is different.
If you’ve been denied an auto loan from your credit union, bank, or a traditional auto finance department, subprime lending could be for you.
Looking for Bad Credit Financing?
Most traditional lenders are hesitant to approve borrowers with credit scores below the 660 range. If you find yourself in one of the lower credit score tiers, and you’re looking for an auto loan, we want to help. At CarsDirect, we’re connected with dealerships that work with subprime lenders.
Subprime, or bad credit, lenders consider more than your credit score for approvals. They look at conditions like your income, overall stability, and willingness to pay to make credit decisions. If approved, the dealer works with you to find a vehicle on their lot that falls within the budget that the lender approves you for.
If you’ve got less than perfect credit, or a unique credit situation, fill out our free car loan request form to get matched to a dealership in your local area with a special finance department.
