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What is a Good Rate for a Used Car Loan?

What is a Good Rate for a Used Car Loan?

70% of private party vehicle purchases are financed. If you’re in that 70%, getting the best auto loan rate can save you thousands of dollars.

Quick links:

How important is your credit score?

What is a good interest rate on a used car loan?

Does pre-approval affect my loan rate?

How do loan terms affect rates?

What interest rate discounts can I get?

Best place to find a used car for sale?

When you buy a car, whether it’s new or used, getting the best interest rate for a used car loan is critical to save you money over the long run.

There are many different auto financing options, which means loan rates can vary, making it necessary to do your research to be sure you’re getting the best rate possible.

How Important is Your Credit Score?

Your credit score is the main factor that determines your interest rate, so it’s best to check your credit score before you apply for auto financing.

Your credit score is based on your credit history. If you have good credit history by making loan and credit card payments on time, your credit score is higher.

Auto loan lenders look at your credit history to see how well you’ve paid debts in the past. With a higher credit score you can expect lower interest rates on your car loan.

If you have bad credit, you may be able to quickly improve your score before getting a loan.

Sites like and provide free credit reports. Knowing your credit score prepares you to research the best interest rates for buying a car.

If your credit score is below 600, check to see what credit card balances you can pay off or pay down before applying for a used car loan. Also, dispute inaccurate charges on your credit report and clean up collection accounts. These actions may increase your credit score and get you a better interest rate on a used car loan.

What is a Good Interest Rate on a Used Car Loan?

Interest rates, which are set by the Federal Reserve, fluctuate within current economic conditions. Interest rates on car loans haven’t fluctuated as much as credit cards and mortgage rates have in recent years, which is good for car buyers.

You want the best rate for a used car loan, as it can save you significant money over the term of the loan. You should shop around to find a lender with the most favorable terms available to you based on your credit score.

For example: you have a credit score of 680, you should expect an interest rate on a used car loan to be about 5.58% (which hasn’t changed much over the past decade).

The age and mileage of the car also affect the interest rate on your car loan. This is something to keep in mind when searching for a used car. Also, be sure to ask the lender about rates on newer cars with fewer miles if the interest rate seems higher than you expected for your credit score.

Does Pre-Approval Affect My Loan Rate?

After you’ve checked your credit score and decided what price range you can afford, it’s a good idea to get pre-approved for an auto loan.

During the pre-approval application process you’ll be able to find out how much you can afford based on your income, credit score, and current interest rates. You’ll also find out what vehicle loan rate you can expect.

Based on these factors, you’ll have an easier time choosing the kind of car that’s ideal for you to buy. If at first you had considered buying a nearly-new BMW, your pre-approval amount may may convince you to start looking at gently-used Fords.

Auto insurance is required in most states in order to purchase a vehicle. When you already know what kind of car you’ll be purchasing, then you can begin to compare auto insurance quotes. Taking the time to choose the right car insurance can help you save money, and you’ll be ready when it comes time to sign papers.

Having all of this information makes your car buying experience easier, because you can make better decisions by being prepared.

Concerned that the pre-approval process might take so long that you miss out on the best loan rates? Not to worry: the PrivateAuto pre-approval process is fast. (Plus, car interest rates don’t fluctuate as much as credit card or mortgage rates, for example.)

You can get pre-approved right in our mobile app to get the best rate for a used car loan.

Then your buyer profile will show as having “verified funds,” which makes you stand out from other potential car buyers and makes it more likely that your offer will be accepted.

Question marks and a car drawn on sticky notes and pinned to a cork board.

How Do Loan Terms Affect Rates?

Usually a loan term to finance a used car is 36-48 months in a normal market. Recent loan terms of 60-72 months have been more common for auto loans, as buyers seek to reduce monthly payments.

With shorter loan terms, the monthly payment is higher, but the interest rate is lower.

Longer auto loan terms often have higher interest rates. With higher interest rates spread over a longer term, monthly loan payments are less, but you end up paying more for the car in the long run.

Using a used car loan calculator can show how loan terms affect your payments.

Be sure to find out all available finance options from the lender before you agree to a payment plan that’s higher than what you can comfortably afford.

Even if you start out with a longer term loan, and you make on-time payments, you can get an auto refinance loan with a better interest rate after paying your current loan down for about 24 months.

What Interest Rate Discounts Can I Get On My Car Loan?

When you speak with your auto loan lender, be sure to ask what rate discounts are available for a used car loan. Lenders may give you a discount on the loan rate for any or all of the following:

  • Automatic payments with your checking account
  • Membership: if you belong to a credit union, have a checking account, or credit card
  • Excellent credit score
  • Larger down-payment: the less you borrow, the less your interest rate may be
  • Just ask: sometimes just asking an auto finance lender is all it takes to get a reduced rate
  • Negotiate lower interest rates after a year of making payments on time
Calculator and note pad on top of cash money.

Where Can I Search for a Used Car?

Browsing used vehicles for sale is easy! PrivateAuto does everything for used car buyers all on one platform, giving you the best customer experience possible.

PrivateAuto is not only a site for secure private party car buying, but also offers in-app financing via third-party lenders who can help you get the best interest rates for a used car loan.

Search for the perfect car, make an offer, schedule a test drive, secure financing, pay the seller, and get the keys to your new-to-you ride–all in one place.

Every step of the process takes the risk out of buying a used car and makes car buying easy.

Experience the PrivateAuto Advantage

Avoid scams, keep personal information private, and guarantee funds with PrivateAuto. Fast, convenient car transactions. Get started today.

Used Car Loan FAQ

Is 5% a good interest rate for a used car?

Yes, 5% is a good interest rate on a used car loan, and is better than average, in the current economic conditions. Interest rates can range from 3-20% on used car loans.

What is a good interest rate for a used car for 72 months?

The average interest rate for a 72-month loan is typically .3% higher than on 60-month loan terms, because longer terms are considered higher risk. The shorter the loan term, the lower the interest rate generally is.

Can you negotiate the interest rate on a used car?

Yes, sometimes all you have to do is ask. There are other factors such as automatic payments, credit union memberships, or discounts with some credit cards that you can get. Just ask the lender what discounts are available.

How can I get a low car loan rate?

To get the lowest interest rate on a used car, increase your credit score as much as possible, see what discounts are available to you, make a large down payment, and get the shortest loan term you can afford.

What is the smartest way to finance a car?

  • check your credit score before even looking for a car to buy
  • pay off outstanding debts on your credit report
  • clean up your credit history by disputing inaccurate information
  • get pre-approved for an auto loan you can afford
  • put at least 20% as a down payment
  • pay all taxes, title transfer fees, registration, and other loan fees with cash
  • get insurance quotes beforehand

How can I negotiate a better interest rate on a car loan?

You can often negotiate a better interest rate on a car loan by just asking what options are available.

Do dealerships control interest rates?

No, car dealerships do not control interest rates. Interest rates are set by the Federal Reserve, but there are many factors that affect the interest rate that an individual can qualify for.

Do age and mileage affect used car loans?

For most loans, auto lenders prefer to finance cars under ten years or 100,000 miles. Each lender has their own restrictions, so be sure to ask the limits up front, before you look for a used car to buy.

Are There Missed Payment Terms on Car Loans?

Car loans often have missed payment terms, so make sure you ask your lender about them. Missed car payments will cost you a late fee and affect your credit score.

They can also cause your interest rate to go up. If your loan has these penalty terms, you will pay significantly more over the life of the loan by missing car payments.

How Do I Know What Car I Can Afford?

If you are unsure about what car you can afford, you should speak with a financial advisor who can give you expert advice. They can also show you ways to increase your credit score so you can get the lowest rates on a car loan.

Alternatively, you can apply for a used car loan and see how much you qualify for. You can then compare the expected monthly payments to your budget to see if that is the right purchase price. If the payments seem too high, you could opt for a less expensive vehicle.

What If I Have Bad Credit?

There are auto lenders who specialize in loans for bad credit. If you are able to make a higher down payment on your loan, it will help reduce your interest rate. Also, by making all loan payments on time, you can later refinance your auto loan to get a better interest rate.

What Lender Fees Should I Expect With a Car Loan?

Though lender fees don’t affect the interest rate on a used car loan, they increase out-of-pocket expenses for buying a car. Different lenders can have different fees, so ask about the fine print.

In addition to lender fees, most states have car transaction fees for:

What If the Lender is Part of a Preferred Network?

Some car finance lenders have loans or rates tied to a preferred auto dealer network. If you are buying a car from a private seller, you may want to avoid these types of lenders.

When you use PrivateAuto, you don’t need to worry about loans or rates tied to preferred networks.