Average Car Loan Interest Rates by Credit Score

By | May 24, 2023

When purchasing a car, many people rely on auto loans to make their dream of owning a vehicle a reality. However, the interest rate you receive on your car loan can significantly impact the overall cost of your vehicle. Lenders determine these rates based on various factors, with credit score being one of the most influential. In this article, we will explore the average car loan interest rates based on credit scores and provide insights to help you understand the correlation between your creditworthiness and the interest rates you may encounter.

Understanding Credit Scores

Before delving into average car loan interest rates, it’s crucial to understand credit scores. A credit score is a numerical representation of an individual’s creditworthiness, reflecting their ability to repay debts. The most widely used credit scoring model is the FICO Score, which ranges from 300 to 850. Higher scores indicate better creditworthiness, while lower scores suggest a higher risk for lenders.

Average Car Loan Interest Rates

  1. Excellent Credit (FICO Score 720 or above) Individuals with excellent credit scores (720 or above) often qualify for the lowest interest rates available. These borrowers pose minimal risk to lenders, making them prime candidates for favorable loan terms. On average, car loan interest rates for individuals with excellent credit fall between 2% and 4%. However, it’s important to note that rates may vary depending on other factors, such as the length of the loan and the specific lender.
  2. Good Credit (FICO Score 680-719) Borrowers with good credit scores (680-719) are still considered reliable and can expect competitive interest rates. The average car loan interest rates for this credit range typically range from 4% to 6%. While rates might be slightly higher than those for excellent credit, borrowers in this category still have access to reasonable loan terms.
  3. Average Credit (FICO Score 620-679) Individuals with average credit scores (620-679) are viewed as moderate risk by lenders. As a result, car loan interest rates for this group tend to be higher than for those with excellent or good credit. On average, borrowers with average credit can expect interest rates ranging from 7% to 10%. While these rates are higher, it’s important to remember that they are still influenced by other factors, such as the borrower’s income and debt-to-income ratio.
  4. Poor Credit (FICO Score below 620) Borrowers with poor credit scores, typically below 620, face significant challenges when it comes to securing car loans. Lenders view these individuals as high-risk, making it more difficult to obtain favorable loan terms. Car loan interest rates for borrowers with poor credit can range from 10% to 20% or even higher. In some cases, borrowers with extremely low credit scores may struggle to qualify for loans altogether. However, alternative financing options, such as buy-here-pay-here dealerships or subprime lenders, might be available at the cost of higher interest rates and stricter terms.

Factors Influencing Car Loan Interest Rates

While credit score is a crucial factor in determining car loan interest rates, it’s important to consider other factors that can influence the rates you receive:

  1. Loan Term: The length of the loan affects the interest rate. Generally, shorter-term loans carry lower interest rates compared to longer-term loans.
  2. Loan Amount: The total amount of the loan can impact the interest rate. Larger loan amounts may result in slightly higher interest rates.
  3. Down Payment: A higher down payment can positively influence the interest rate by reducing the amount borrowed and perceived risk for lenders.
  4. Lender: Different lenders have varying criteria and guidelines when it comes to interest rates. Shopping around and comparing offers from multiple lenders can help you secure the most favorable terms.


Understanding the correlation between credit scores and car loan interest rates is crucial when planning to finance a vehicle. Individuals with excellent credit scores generally enjoy the lowest interest rates, while those with poor credit face higher rates and more limited options. However, it’s essential to remember that credit score is not the sole determining factor for interest rates, and other variables, such as loan term, loan amount, down payment, and lender choice, also play significant roles.

To secure the most favorable car loan interest rates, it’s advisable to maintain a good credit score, improve your creditworthiness over time, and explore different lenders to find the best terms. By doing so, you can save money over the life of your car loan and make the most of your vehicle purchase.


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