What is a normal car loan interest rate?
I’m in the market for a new Ford Bronco, but I need to take out a loan. I’ve never had a car loan before, so I want to make sure I get the best rate possible. What is a typical car loan interest rate?
Congrats on the soon-to-be new purchase! Interest rates for a car loan depend on several factors, including your:
- Debt-to-income ratio
- Loan term
- Loan amount
Together, these factors determine your interest rate. For a reference point, here’s a glance at typical car loan interest rates for new cars based on credit score in 2021:
- 300 to 500: 14% to 20%
- 501 to 600: 11% to 17%
- 601 to 660: 6% to 15%
- 661 to 780: 3% to 9%
- 781 and up: 2% to 6%
Let’s break these down so you’re familiar with the process and what to expect for a typical car loan interest rate.
Creditworthiness is your proven ability to pay back loans. It’s a mix of your credit score and credit history. If you have a decent to great credit score (660 or more), getting a car loan is rarely difficult. However, you need to have a decent amount of credit history to back it up.
Income is simply how much you make from your job, investments, or other earnings. Social Security income and unemployment typically don’t count toward this. If you have enough income to support a loan payment on a Ford Bronco each month, your chances of approval will improve. To determine how much you can afford, lenders require:
- Pay stubs
- Bank statements
- Tax returns
Debt-to-income is the ratio of your monthly debt to your monthly pre-tax income. The magic number in the lending industry is 43%, so as long as your debt-to-income ratio is below this threshold, it increases your chance of approval.
The loan term and loan amount also determine your car loan rate. The higher the loan amount, the higher the risk perceived by the lender. As a result, they will assess a higher interest rate. Simply put, the longer your repayment period, the higher your interest rate will be.
Because so many factors go into determining your rate, the only way to get the best deal is to shop around with as many lenders as possible. You may also want to consider pre-approval, which can determine what your interest rate might be and help you budget.
Since you’re putting in the time and work to purchase your Ford Bronco, take the same care in making sure it’s protected. Compare car insurance rates with the Jerry app to help you get the best coverage for the lowest price. Jerry compares personalized rates from the top 50 providers, including Nationwide, Allstate, and Travelers, and delivers the best deals to your phone in minutes for free. The average Jerry driver saves $879 a year on car insurance!
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