What Kind of Auto Loan Rates Can I Expect?

When shopping for a car loan, you need to understand your credit history and credit score as well as the financing options available to you in order to find the best rate.

While having little credit or a thin credit file will prevent you from getting the best rates available, you do not need to settle for steep rates, like the 30-plus percent offered at a Buy Here Pay Here lot. 

The average rate fluctuates so you can check it any time at Bankrate.com to get an idea of what kind of interest rates people are getting on their auto loans. If you have not yet built up a credit history, you will qualify for higher loan rates than average.

Lenders want to know they can trust you to make your payments on time each month. If you don’t have much history, they consider you a bigger gamble and thus charge you a higher interest rate.

Banking and car loan experts agree that you will likely see rates under 20 percent as you begin applying for financing.

It’s hard to get an exact idea of your rate without actually applying for a loan, because various factors go into determining a loan rate such as your credit history, credit score, your employment, and even whether you buy a new or used car.

Edmunds.com, a car-buying website, breaks it into two categories - buying new and buying used. According to their research, you can expect rates of about 9.5 percent to 12.2 percent for a new car and 14.2 percent and 17.8 percent for a used car.

Make sure you shop around before going to the dealership so you have a solid understanding of what kind of rates you qualify for. You could even secure financing before you buy the car, but if you shopped around you will know at least if the financing offered by the dealership is a good deal or a rip-off.