What is a Good Interest Rate for Your Car Loan?
Whether you’re shopping for a new vehicle or a pre-owned one in the Bloomington or Peoria area, you likely want to avoid overpaying and qualify for the best car finance rates. When it comes to determining the best rates for auto loans, your credit score is the single biggest factor that lenders look at. At Sam Leman Automotive Group, we’re dedicated to helping make car ownership accessible and affordable. So, we’re here to help you find the average interest rate for a car loan, the current interest rates for car loans, and to better understand the question: “What is a good interest rate on a car loan?”
What is an Interest Rate?
Like all other auto loans, there will be an interest rate attached to it. This interest rate is the amount the lender charges you for borrowing money to pay for your vehicle. The interest rate is determined by several factors, including:
- Your credit score
- Loan amount
- Length of the loan term
- Down payment
- Monthly payments
You can lower your interest rate by making a larger down payment, offering to make larger monthly payments, and improving your credit score before beginning the buying process.
How to Calculate Auto Loan Interest for the First Payment
When trying to figure out the interest rate on a car loan, these are the steps you follow:
- Divide your interest rate by the number of monthly payments you will be making this year.
- Multiply it by the balance of your loan, which for the first payment, will be your whole principal amount.
Using this simple formula, you can figure out the amount of interest on your first car payment.
New and Used Car APR
These are the average auto loan rates for a new car:
- 781-850: 4.75% APR
- 661-780: 5.82% APR
- 601-660: 8.12% APR
- 501-600: 10.79% APR
- 300-500: 13.42% APR
But what about the average interest rate on used cars? See below:
- 781-850: 5.99% APR
- 661-780: 7.83% APR
- 601-660: 12.08% APR
- 501-600: 17.46% APR
- 300-500: 20.62% APR
How Do You Get the Best Car Finance Rate?
As you can see from the above numbers, the best rates for an auto loan can vary significantly, depending on your credit score. (For example, anywhere from 4.75% to 13.42% for a new vehicle and 5.99% to 20.62% for a used one.) There are some things you can do to make sure you qualify for the best car finance rate. First, check your credit score and report. Make a note of your current score, review your credit report, and dispute any errors right away. The higher your score, the lower your finance rate will be.
Also, be ready to negotiate. If a lender offers a higher interest rate than you were expecting, try to negotiate an offer that is more in line with your budget.
Apply for Financing at Sam Leman Automotive Group
Our finance department at Sam Leman Automotive Group will guide you through the process of applying for financing and locking in the best rates for auto loans. Contact us with any questions, and get the process started by getting approved online before your visit to our Bloomington, Morton, Peoria dealership.