When buying a car, most people rely on auto loans to finance their purchase. One of the biggest factors that affects how much you pay for a car loan is your credit score. Whether you have excellent credit or poor credit, your score will influence the interest rate lenders offer you.
This guide explains the average car loan interest rates by credit score in 2025, what affects those rates, and how you can secure a better deal.
What Is a Credit Score and Why It Matters
A credit score is a number that represents your creditworthiness. It is usually based on your credit history, payment behavior, and the amount of debt you carry. The most common credit score model, FICO Score, ranges from 300 to 850.
Higher scores mean lower risk for lenders, so they offer better interest rates. Lower scores signal higher risk, which leads to higher interest rates and tougher loan approval standards.
Average Car Loan Interest Rates by Credit Score in 2025
Auto loan rates vary based on whether you’re buying a new or used car and whether you’re getting the loan from a bank, credit union, or dealership financing. Here’s a breakdown of the average interest rates in 2025, categorized by FICO score range:
For New Car Loans
- Excellent (781–850): 4.0% APR
- Good (661–780): 5.2% APR
- Fair (601–660): 8.4% APR
- Poor (501–600): 11.3% APR
- Very Poor (300–500): 14.8% APR
For Used Car Loans
- Excellent (781–850): 5.2% APR
- Good (661–780): 6.8% APR
- Fair (601–660): 10.3% APR
- Poor (501–600): 13.9% APR
- Very Poor (300–500): 18.5% APR
As you can see, people with excellent credit can save thousands of dollars over the life of the loan compared to those with poor credit.
Why Used Cars Have Higher Interest Rates
You might wonder why used car loans come with higher interest rates. It’s mainly because used cars are riskier assets for lenders. They depreciate faster, may have mechanical issues, and are harder to resell if repossessed. To cover this risk, lenders charge higher rates.
Where to Find the Best Auto Loan Rates
The interest rate also depends on where you get the loan from. Here’s a quick comparison:
- Credit Unions: Often offer the lowest rates. Members get better deals and flexible repayment options.
- Banks: Good option if you have an account with the bank or a strong relationship.
- Online Lenders: Convenient, fast approval, and competitive rates.
- Dealership Financing: Easy but often comes with markup unless you qualify for 0% promotional APRs.
You can compare rates at trusted sites like Bankrate or NerdWallet.
Tips to Get the Best Car Loan Interest Rate
Even if your credit score isn’t perfect, you can take steps to lower your interest rate:
- Check Your Credit Score: Use free services from Credit Karma or AnnualCreditReport.com.
- Improve Your Credit: Pay bills on time, lower your debt, and correct any errors on your credit report.
- Make a Bigger Down Payment: The more you pay upfront, the less you need to borrow, which means less interest.
- Compare Multiple Lenders: Don’t go with the first offer. Shop around and negotiate.
- Get Pre-Approved: Pre-approval gives you bargaining power at the dealership.
How Credit Score Impacts Loan Costs
Let’s consider an example. Suppose you finance a $25,000 car over 60 months:
- Excellent Credit (4.0%): Monthly payment ≈ $460 | Total interest ≈ $2,600
- Poor Credit (14.8%): Monthly payment ≈ $595 | Total interest ≈ $10,700
That’s an $8,100 difference, all due to your credit score. That’s why improving your credit before applying for a loan can make a huge impact.
Can You Get a Car Loan with Bad Credit?
Yes, you can still get a car loan with bad credit, but expect to pay more. Some lenders specialize in subprime auto loans. These often come with:
- Higher interest rates (15–25%)
- Larger down payment requirements
- Shorter loan terms
However, if you make on-time payments, your credit will improve, and you can refinance for a better rate later.
Final Thoughts
Your credit score plays a major role in determining how much interest you’ll pay on a car loan. Whether you’re buying a new or used vehicle, knowing where you stand and how rates differ can save you thousands.
If your score is low, consider taking a few months to raise it before applying. The extra time could be worth the savings.
To explore top-rated auto loan providers based on your credit score, check out trusted resources like NerdWallet or Bankrate.
Also Read – Nissan Just Killed America’s Cheapest Car – What’s Next?
