What Is a Good Interest Rate for a Car Loan in 2025?

What counts as a "good" car loan rate in 2025 depends entirely on your credit score, the type of car you're buying, and current market conditions. This guide breaks down average rates by credit tier so you know exactly what to aim for. Knowing what rates are available to you can save thousands over the life of your loan. With auto loan rates ranging from 3.5% to 15%+ depending on credit, understanding where you stand is crucial for negotiating the best deal.

Average Car Loan Rates by Credit Score

Based on 2025 industry data, here are typical rates for new cars. These rates reflect current market conditions and can vary by lender, loan term, and down payment amount:

• Excellent (780+): 3.5% - 5.0%. These borrowers get the best rates available and may qualify for manufacturer incentives.
• Good (720-779): 5.0% - 6.5%. Still competitive rates, though slightly higher than the best tier.
• Fair (660-719): 6.5% - 9.5%. Rates start to increase significantly in this range. Consider improving your score before applying.
• Poor (620-659): 10% - 15%. High rates that significantly increase total cost. A larger down payment or shorter term can help offset this.
• Bad (below 620): 15%+ or no approval. Very expensive financing that should be avoided if possible. Consider a cheaper car or waiting to improve your credit.

Used car rates are typically 1-3% higher across all tiers due to increased lender risk. The older the vehicle, the higher the rate you can expect.

New Car vs. Used Car Rates

New cars almost always have lower interest rates because they serve as better collateral. Manufacturers also subsidize rates on new cars through their financing arms (like Toyota Financial Services or Honda Finance). In 2025, the gap between new and used rates has widened to roughly 2-3 percentage points.

For example, a borrower with a 720 credit score might get 4.5% on a new car but 6.5% on a used car. On a $30,000 loan over 60 months, that 2% difference costs an extra $1,800 in interest. This is why buying new sometimes makes more financial sense than buying used, despite the higher purchase price.

What Rate Should You Aim For?

• Excellent credit: You should not accept anything above 5% on a new car and 7% on a used car. You have the leverage to negotiate the best rates available.
• Good credit: Aim for under 7% on new, under 9% on used. Shop around to find the best rate — different lenders offer different rates for the same credit profile.
• Fair credit: Work on improving your score before applying if possible. Even a 30-point improvement can save hundreds in interest. If you must buy now, expect 7-10% and focus on making a large down payment.

How to Negotiate a Lower Rate

• Get pre-approved at a credit union or bank before visiting the dealership. This gives you a baseline rate to beat and prevents the dealer from marking up your rate.
• Compare offers from at least three lenders. Different lenders have different risk appetites and may offer significantly different rates for the same borrower.
• Ask the dealer to beat your pre-approval rate. Dealers often have access to special financing programs and can sometimes beat bank rates, especially on new cars.
• Shorten the term — rates are often lower on 36-month loans than 72-month loans. A shorter term also saves you thousands in interest.
• Make a larger down payment — a lower loan-to-value ratio can qualify you for better rates. Putting 20% down instead of 10% may reduce your rate by 0.5-1%.

When to Refinance Your Auto Loan

If you took a loan when your credit was lower, refinancing after improving your score can save hundreds per year. A general rule: if you can lower your rate by 2% or more and plan to keep the car for at least 12 more months, refinancing is worth considering. Use our Car Loan Calculator to compare your current loan with potential refinancing options and see exactly how much you could save.