It’s that dream car you’ve always wanted, but you can’t reasonably afford to put out the cash to buy it, so you’ve turned to a car loan for help. Before you hit the road, though, there’s some critical information you should consider about the interest rates.
The average auto loan interest rate can vary as significantly as almost 13% between two borrowers, depending on credit score. That’s a world of difference, one that could make or break your decision to buy that new car depending on your financial situation.
How do car loans work though? What are current loan rates? What is a car loan?
By taking a closer look at the systems used by lenders, we can get some more insight into getting the best APR and how it’s calculated. Read on to learn more about making a car loan payment!
What Is a Good Car Loan Interest Rate?
There are a lot of smaller factors at play when it comes to the question of what is a good car loan rate, but without a doubt, the two most important determining factors are your credit score and whether the vehicle is used and from a reputable dealer.
You don't want to end up with a bad vehicle loan!
Your credit score is particularly influential over the final figure that you’ll be presented with. This is because your credit score will determine the APR bracket you end up in, limiting the floors and ceilings of the interest rates.
Car Loan Interest and Credit
If you’ve never had to take out a loan before, then you may be venturing into new territory with all this talk of credit score. First, we’ll break up those brackets that we mentioned earlier, explaining what they mean precisely.
Your credit score can range from super-prime to deep subprime. To illustrate the monumental difference in APR between these brackets, we can look at the data in a handy list.
So, what is the interest rate on a car loan?
- Super prime will net you an average APR of 2-4% on a car
- Prime will be between 3-6%
- Nonprime can be expected to be somewhere between 6-11%
- Subprime has an APR of 11-18%
- Deep subprime will carry a hit of 14-21%
As you can see, bad credit car loans can be brutal. Can you refinance a car loan? Yes, but car loans for bad credit will not typically get any better. Credit union loans for cars are an option, but they'll have similar rates.
Generally, auto financing has set standards regardless of whether or not it's a bank. Figuring out how to get a car loan with bad credit will always be an uphill battle.
If you want to know how to pay off a car loan faster and you are struggling, have a look at these tips.
So that begs the question of how to get a car loan. A Chase car loan makes things a little less complicated since they've got a car loan calculator! A Bank of America car loan might also be worth a look.
The variance between super-prime and deep subprime is already enough of a gulf, but you might be wondering why there’s so much variance in each category. Well, that’s to do with whether the vehicle has been previously owned, bringing us to our next point.
Verify the Details
Make sure you’re buying from a good dealer and check the VIN using a service like EpicVIN before taking a car loan. You’ll avoid common pitfalls like purchasing a vehicle where the seller misinformed you about its condition or legal status.
It's even more important to avoid that situation so that you don't have to figure out how to sell a car with a loan!
That way, when you finally get out on the road, it’ll be without the added burden of worrying about unnecessary interest rates, loan care, or car title loans hanging over your head.
