What Is a Good APR for a Car Loan?

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In most cases, 2% is a very good APR—but this rate is usually only accessible to people with good credit.
APR stands for annual percentage rate. It refers to the percentage of the loan amount that you’ll be charged each year to finance the loan, often known simply as the interest rate.
When you take out a car loan, you have to pay it off by making monthly payments. These payments go towards both the principal loan amount and the interest. Your APR determines how much interest you will have to pay.
If you’re wondering how to get a good APR for your auto loan, car insurance comparison and loan refinancing app Jerry has the answers.
Not only that—Jerry can help you save on your car loan. This intelligent, AI-based app is the fastest, most accurate way to comparison shop for loan options—and you won’t have to spend time making calls. (And bonus—it's free to find and compare quotes!)

What impacts an APR for car loans?

Credit score

The most important factor impacting APR is your credit score. Great credit scores mean that you can access low interest rates. If you have poor credit, you’ll probably be offered a higher APR.
This is because people with low credit scores are seen as more likely to miss payments and default on a loan. If that happens, the lender will repossess your vehicle and try to sell it. But lenders risk losing money during this process, so they charge you a higher interest rate in order to mitigate this risk.
You can improve your credit score by paying your debts on time. In some cases, having a cosigner for your loan can also help give your score a boost.
A quick guide to credit scores:
  • Bad credit: 300–629
  • Fair credit: 630–689
  • Good credit: 690–719
  • Excellent credit: 720–850

Type of car

The type of car you’re trying to secure a loan for can also impact your APR. Interest rates tend to be higher for used cars than newer models, reflecting the increased risk of lending money for an older car. Newer cars tend to offer a lower APR. The make, model, and year of the car also factor into the APR since they affect resale value.

Loan term

Longer loan terms are considered higher risk and often come with higher interest rates. While the typical loan term ranges from two to five years, some are available for much longer.

How APRs for car loans vary depending on different variables

Here are some examples of APR by credit score and type of loan:
Credit scoreNew vehicleUsed vehicleRefinancing
Excellent (750-850)4.93 APR5.18 APR4.36 APR
Good (700-749)5.06 APR5.31 APR5.06 APR
Fair (650-699)11.30 APR11.55 APR7.82 APR
Subprime (450-649)17.93 APR18.18 APR16.27 APR
Deep subprime (449 or less)25.05 APR25.30 APR19.47 APR

Why do interest rates vary for loans for new and used vehicles?

It all comes down to reliability. Used cars are considered less reliable than new cars. High mileage, multiple owners, and wear and tear contribute to an increased risk of breakdown. And if the vehicle breaks down, then you may not continue to make payments on the loan.
But it’s important to consider the big picture. You could break even or save money in the long term with a used car. Used cars are usually less expensive than new cars—so while a used car might mean a higher interest rate, you’ll generally need a smaller loan that takes less time to pay back.
The length of the loan affects the interest rate, too. Older cars usually aren’t eligible for long-term loans, while newer cars with long loan terms typically have higher interest rates.

Average auto loan rates by lender

The rates from banks tend to be good, and from credit unions even better. Some dealerships will finance their own loans, too. Here are some APR ranges from top lenders in the country:
  • CapitalOne: 3.24–24.99 APR
  • Wells Fargo: 3.99–24.24 APR
  • Boeing Employee Credit Union (BECU): 2.69–2.94 APR
Some lenders have restrictions on the types of loans they will approve. For example, CapitalOne does not approve loans for vehicles older than 2006. Make sure you check with your lending institution if you have a particular vehicle in mind.
And if you’re looking for additional savings, shopping around for your insurance is also a good idea! An AI-based tool like Jerry can help.
In less than a minute, the Jerry app compares quotes from over 45 different providers and gives you three affordable options. When you’re ready to purchase, Jerry takes care of all the paperwork and even cancels your old policy. And did we mention that the comparison shopping is always free?

How a low APR saves you money

To save money, look for a shorter term loan with a low APR. While your monthly payments may be higher, you’ll spend less time making payments so less interest will accrue. In the end, more money will go towards the principal rather than interest.
A higher APR, even over a short loan term, can add up to hundreds or thousands of dollars in interest. Simply put, a lower APR means you spend less money overall while repaying your car loan.
Here’s an example:
If you take out a loan for $30,000 with a 5% APR and a 5-year loan term, you’ll pay $3,968 in interest over the life of your loan. In comparison, a higher APR of 20% for the same loan term would accrue $17,688 in interest. The lower APR results in savings of about $14,000!

How to find a car loan with a low APR

So it should be pretty clear: a low APR can save you thousands of dollars over the term of your loan. That means that you aren’t just shopping for a car, you’re shopping for a loan.
Comparison shopping is the best way to ensure you’re getting the most favorable loan terms, including a low APR. Start your search about a month before you’re ready to buy. You’ll have two weeks after your first pre-approval application to submit as many as you’d like and have them appear as just one hard inquiry on your credit report.
If you’re having trouble finding loans with a low APR, you may need to step back and improve your credit score. You may also want to look for a shorter loan term or reduce the total loan amount by increasing your down payment.
If you need to make more room in your budget for down payment savings, reducing your insurance is a good place to start. As a licensed broker, Jerry does all the hard work of finding the cheapest quotes from top insurance companies and finalizing your purchase. Jerry will even cancel your old policy for you.
And to ensure you always have the lowest rate, Jerry will send you new quotes every time your policy comes up for renewal—so you’re always getting the coverage you want at the best price.

Car loan comparison tool

You can also let Jerry compare rates and find out how much you can save on your loan. As an AI-powered broker, Jerry gives you all of the savings with none of the hassle—and it’s insurance quotes are totally free to use.
Jerry is your one-stop shop for auto loan refinancing.
"Customer service agents provided helpful guidance along the way, and we couldn’t be more pleased with the experience. It was great from start to finish. Thanks Jerry!"—Jerry user

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