Among all financing sources, the average APR on a new car loan for someone with good credit is right around 3% for new cars and just over 3% for used cars.
The picture is brightest for people with credit scores above 720.
How does Apr work on a car loan?
APR stands for “Annual Percentage Rate.” It is the annual rate of finance charge you pay for your loan or credit line. For car loans, APR is the rate you pay that accounts for your interest charges plus all other fees you have to pay to get your loan. The lower of the two rates is your interest rate or note rate.
Why is APR higher for used cars?
Credit scores are another reason why new cars have lower rates than used ones. People with higher credit scores tend to go for new cars, while those with lower scores pick used ones. After all, a lower risk of repossession means lower interest rates — and the risk of repossession is much lower with new cars.
What is a good interest rate on a car?
Here is a breakdown of the typical interest rates you can expect with different credit scores: 850 – 740: Excellent credit score – 3.2% interest rate (on average) 739 – 680: Average credit score – 4.5% interest rate (on average) 680 and below: Sub-Prime credit score – 6.5 – 12.9% interest rate (on average) *
Photo in the article by “NOAA Ocean Explorer – National Oceanic and Atmospheric …”