What is the Average Interest Rate on Used Cars?

A row of used cars inside a dealership on the showroom floor

The average interest rate for used cars in 2019 is 4.24% to 12.25% depending on your credit score. In 2018, the average rates were 4.42% to 19.73% depending on credit scores. We saw average used car interest rates remain around the same rate throughout 2018 as they averaged back in 2017.

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Are Interest Rates Higher on Used Car Loans?

Yes. Several reasons cause the average interest rates to be higher for used cars. First, new cars have a higher resale value, which is easier to predict. If the bank needs to repossess the vehicle, they know what to expect. That's harder to predict with a used car and lenders want to profit on their investment. Furthermore, people with a high credit score tend to purchase new cars. Those with bad credit opt for used cars instead. This isn't always the case, but the lower credit score does affect the interest rate negatively.

What's a Good Interest Rate for Used Cars?

Considering that the national average on a 60-month loan right now is 4.21%, you'll want to pay less than that, if possible. If you have a good credit score, you can expect to pay this or less on your used vehicle. If you have a bad credit score (or it needs some rebuilding), you might end up with an interest rate over 10%.

Auto Loan Interest Rate Factors

The final interest rates presented to you for used cars you're looking to finance depend on these 8 factors: 

  1. Credit score - the higher your credit score, the lower the interest rate is. 
  2. Amount financed - the less money that's funded, the lower your rate will be. The amount financed depends on the total cost of the vehicle and how much of a down payment you're willing to give. 
  3. Trade-in - adding a trade-in vehicle to the mix also reduces the amount of money financed. 
  4. Down Payment - another way to lower this cost is to provide a down payment. Having a substantial down payment lowers the amount that needs to be financed which in turn lowers the risk to the bank lowering your interest rate. 
  5. Auto loan term - the longer the term, the higher the interest rate. That's because the bank's liability increases, the longer the term goes on. 
  6. Vehicle Age - the older your car is, the less resale value it has. This becomes a liability to the lender and increases the auto loan interest rate. 
  7. Vehicle Type - car types with a high resale value often have lower interest rates. Trucks and SUVs cost more on average than sedans or coupes. Aside from average body style specific depreciation rates, resale values are higher for more expensive vehicles. 
  8. Dealership In-house financing vs. Banks - depending on the dealership and banking institutions willing to finance said loan, dealerships might offer better rates than the bank. It's also the easier, more straightforward option. Examine all options for the best possible rate.

Used Car Loans: Why Higher Credit Scores Help You Save Money

Ascending and descending stacks of coin money symbolizing the ebb and flow of auto loan interest rate averages

The higher your credit score is, the lower your average interest rate on used cars is. Let's take a look at the average auto loan interest rates affected by credit scores available right now. Typically, a credit score below 589 is going to give you a higher interest rate. You could pay 16% or more. Having a credit score between 590 and 619 tends to take shoppers closer to the 10% mark. As you move up in credit score, the interest rate continues to drop until you get to lower than 4.24% with excellent credit.

Used Car Loan Terms: Why Shorter Terms Help You Save Money

The faster you pay off your car loan, the better the interest rate will be. In general, most car loans are structured in 12-month increments. These tend to come as 24-month, 36-month, 48-month, 60-month, and 72-month terms. Choose the shortest time frame you can handle, and you'll save a lot more money. Even if you engage in a longer loan term but end up paying off the vehicle before the end of the loan term by making larger than required payments, you will save money by paying less interest as well.

Used Cars for Sale at Phil Long

We are experts on loan rates for used cars here at Phil Long. We've been giving out used car loans for decades on the best used cars in the Colorado Springs area. We do everything we can to get you behind the wheel of a vehicle you love at a price you'll love. We will work with you to figure out the best way to get your monthly payments down. Stop by today for a test drive and to find out what used car loan rates we can offer you!

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Phil Long Dealerships

1212A Motor City Dr
Directions Colorado Springs, CO 80905

  • Sales: (719) 387-5744
  • Service: (719) 387-7037
  • Finance: (719) 387-7162

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