Average Interest Rates for Auto Loans in 2025

In 2025, owning a car remains an essential part of life for many Americans—whether for commuting, business, or family needs. As vehicle prices continue to rise, most people rely on auto loans to finance their purchases. One of the most crucial aspects of any car loan is the interest rate, which significantly impacts the total cost of the vehicle over time.

Understanding the average interest rates for auto loans in 2025 can help you make informed decisions, negotiate better loan terms, and save thousands of dollars. In this comprehensive guide, we’ll explore the latest trends, influencing factors, lender comparisons, and tips to secure the lowest possible rate.

What Is an Auto Loan Interest Rate?

An auto loan interest rate is the percentage charged by a lender on the borrowed amount to purchase a car. This rate is expressed as an Annual Percentage Rate (APR) and includes both interest and any applicable fees.

A lower interest rate means lower monthly payments and a reduced total repayment amount over the life of the loan. Even a small difference—say, 1%—can mean saving hundreds or even thousands of dollars.

Average Auto Loan Interest Rates in 2025

As of mid-2025, average interest rates for auto loans in the U.S. are as follows:

Credit Score Range	New Car APR	Used Car APR
781–850 (Excellent)	3.9%	4.5%
661–780 (Good)	5.2%	6.7%
601–660 (Fair)	8.0%	10.1%
501–600 (Poor)	12.9%	16.3%
300–500 (Very Poor)	15.9%+	20%+

These rates are subject to change depending on market conditions, lender policies, and the Federal Reserve’s interest rate decisions.

Factors That Affect Your Auto Loan Interest Rate

Understanding what influences your loan’s interest rate can help you plan better and potentially reduce your borrowing costs. Here are the main factors:

1. Credit Score

Your credit score is the single most influential factor. Borrowers with excellent credit (above 750) receive the most competitive interest rates, while those with poor credit face significantly higher APRs.

Tip: Check your credit report regularly and fix any errors before applying for a loan.

2. Loan Term

Shorter loan terms (36 or 48 months) typically have lower interest rates compared to longer terms (60 or 72 months). However, shorter terms come with higher monthly payments.

3. New vs. Used Vehicles

New cars usually qualify for lower interest rates due to lower perceived risk by lenders. Used cars, especially older models, often carry higher rates due to faster depreciation and a higher chance of repair issues.

4. Down Payment

A larger down payment reduces the lender’s risk, which can translate into a lower APR.

5. Lender Type

Different lenders offer varying rates. Banks, credit unions, online lenders, and dealership financing all have different lending criteria.

Interest Rates by Lender Type in 2025

Let’s look at how interest rates vary by lender in 2025:

Lender Type	New Car APR	Used Car APR
Banks	4.5%–8.5%	6.0%–10.0%
Credit Unions	3.9%–7.2%	5.2%–9.5%
Online Lenders	5.0%–10.0%	6.5%–12.0%
Dealership Financing	0%–9.9%*	5.9%–13.5%

*Promotional 0% APR deals are usually reserved for buyers with excellent credit and select models.

Auto Loan Trends in 2025

Several market trends are influencing interest rates and loan structures in 2025:

1. Higher Federal Interest Rates

The Federal Reserve increased benchmark interest rates to combat inflation, which has a ripple effect on auto loans. This has slightly increased the average auto loan APRs compared to 2023 and 2024.

2. Longer Loan Terms

Many consumers are opting for longer loan terms—up to 84 months—to offset rising car prices. While this lowers monthly payments, it results in higher total interest paid over time.

3. Electric Vehicle Financing

With EVs gaining popularity, some lenders are offering special low-rate loans for electric and hybrid vehicles to support the green transition.

4. Online Loan Pre-Approval

Digital pre-approvals and fintech lenders continue to grow, providing more transparent and competitive interest rates to tech-savvy buyers.

Real-World Examples of Auto Loan Costs in 2025

Scenario 1: New Car Loan (Excellent Credit)

Price: $45,000
Down payment: $5,000
Loan amount: $40,000
Interest rate: 3.9%
Term: 60 months
Monthly payment: ~$737
Total interest: ~$4,200

Scenario 2: Used Car Loan (Fair Credit)

Price: $25,000
Down payment: $3,000
Loan amount: $22,000
Interest rate: 10.1%
Term: 60 months
Monthly payment: ~$468
Total interest: ~$6,080

As shown, interest rates can dramatically affect the total cost—even if the car itself is cheaper.

How to Get the Best Auto Loan Rate in 2025

Improve Your Credit Score
- Pay down credit card balances
- Avoid late payments
- Dispute errors on your credit report
Compare Offers from Multiple Lenders
- Never accept the first offer. Shop around using comparison platforms or get quotes from banks, credit unions, and online lenders.
Get Pre-Approved
- Pre-approval gives you bargaining power and a clear understanding of what you can afford.
Opt for a Shorter Loan Term
- Although the monthly payments are higher, shorter terms reduce interest accumulation.
Make a Larger Down Payment
- Aim for at least 20% to reduce the loan principal and improve your interest rate.
Consider Certified Pre-Owned (CPO) Vehicles
- CPO vehicles offer reliability, lower prices than new cars, and can qualify for better interest rates compared to regular used cars.

Frequently Asked Questions (FAQs)

Q1: Are auto loan interest rates negotiable?

Yes, you can often negotiate with lenders or dealerships, especially if you have pre-approval or a strong credit history.

Q2: What credit score is needed for 0% APR?

Typically, a credit score of 750 or higher is required for 0% promotional financing offers.

Q3: Does refinancing help reduce my interest rate?

Yes, refinancing can lower your interest rate if your credit score has improved or if market rates have dropped.

Q4: Can I finance a car with no credit history?

Yes, but you may face higher interest rates or need a co-signer. Some lenders offer “first-time buyer” programs.

Final Thoughts

Understanding the average interest rates for auto loans in 2025 is essential for anyone planning to finance a car. While rates have increased slightly due to economic conditions, smart borrowers can still secure favorable terms by maintaining good credit, shopping around, and choosing the right lender.

Remember, a lower interest rate can save you thousands over the life of your loan—so don’t rush the process. Take the time to compare, calculate, and negotiate to make the most financially sound decision for your automotive future.