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When you are looking at loan rates for used cars, you might become confused at all the numbers and options. At Phil Long Dealerships, we want you to understand how used car loans work and how to maximize your savings. We've put together a quick guide explaining used car loan rates and what you need to know.

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Are Interest Rates Higher on Used Cars?

Yes and no. Yes, on average interest rates are higher for used cars; No, interest rates on used cars are not always higher than new car interest rates. There are several reasons that the loan rates for used cars can be higher than loan rates on new cars. The first reason is due to the resale value. On a new vehicle, resale value is easier to predict, so the bank knows what they will receive in return on interest or on repossession. 

Furthermore, lenders want you to buy a new car, so they lower the interest rate as an incentive to buy new. The third reason is due to credit scores. Most of the time, people with good credit tend to purchase new cars, while people with lower credit scores opt to buy used instead. New car interest rates are not always lower than used car interest rates. In some cases where credit score plays a heavy role in your interest rate, you could see a higher interest rate on a new car versus a used car if you didn't qualify for certain incentives or new car financing bonuses that would normally lower your interest rate because your credit score wasn't high enough.

Used Car Loan Rates vs. New Car Loan Rates

When you are looking at loan rates for used cars, it's helpful to compare them against new car rates. With new-car financing, you can pay as little as 0% APR for a certain number of months at the beginning of the loan with manufacturer incentives and the help of banks. With this help, you will see new car loan rates at lower interest than those offered in used car auto loans. Used-car funding, on the other hand, doesn't come with these incentives. Currently, the U.S. national average auto loan interest rates for new cars sit around 4.7 percent while the average interest rates on used cars sit at about 5.35 percent.

Auto Loan Interest Rate Factors

The interest rates on auto loans vary person to person by a set of determinant factors. The factors that affect the interest rates on used cars and new cars include:

  1. Credit Score - The higher your FICO credit score, the lower the interest rate you can expect to receive on your auto loan.
  2. Amount Financed - The more liability or risk a bank, lender, or dealership has to assess affects your interest rates. 
  3. Trade-In - The value of a trade-in lowers the amount you need to finance thus affecting your overall interest rate.
  4. Deposit - Similar to the trade-in factor, you can lower the amount of money that needs to be financed by putting money down which also reduces financial liability.
  5. Auto Loan Term Length - Even though longer terms typically offer up lower monthly payments, longer loan terms increase the liability the bank or lender faces.
  6. Vehicle Age - If the car breaks down, the bank might not get paid. This increases liability affecting your interest rates. 
  7. Dealer In-House Financing vs Banks (Outside Lenders) - Most dealerships don't, or can't, offer the same interest rates as a local bank or credit union. However, dealerships may offer certain incentives that outside lenders can't.

What is a Good Interest Rate for a Used Car?

As you evaluate the loan rates for used cars, you will find a wide variety being offered, based on the above factors. Generally speaking, a good interest rate right now would be under 4.21% on 60-month (5-yr) loans.

Used Car Loan Rates by Credit Score: Why Higher Scores Help Rates

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Out-of-Pocket Cost per FICO Score

Higher credit scores help you get lower interest rates, which helps you save money, because there is less financial liability and risk for a lender to loan you money. Banks want to make sure they get a good return on their investment, credit scores help them determine if they are taking a risk loaning you money. With a high credit score, there is essentially no risk so lenders are comfortable with lower interest rates because they are confident they will make their money back. More risk means higher interest rates. Let's evaluate what would happen to a used car loan based on multiple credit score ranges. For this comparison of loan rates for used cars, we will use a $10,000 used car.


1) 36 mo. car loan term with 500 Credit Score = $1,990 additional out-of-pocket cost on average . With a credit score of 500 or less, you could find a high interest rate of about 17%. For a 36-month term, that $10,000 car will cost a total of $12,835.08. For the average interest rate of 12.19%, expect to pay a total cost of $11,990 over the term life.

2) 48 mo. car loan term with 500 Credit Score = $2,685 additional out-of-pocket cost on average. Let’s assume that you have the same high 17% interest rate or an average of 12.19% in this equation. You would be spending $13,850 after 48 months at 17% while you would spend $12,685 at 12.19%.

3) 72 mo. car loan term with 500 Credit Score = $4,147 additional out-of-pocket cost on average. At 72 months with the same high interest rate of 17% or average interest rate of 12.19%, you can expect to pay around $16,017 after 72 months with 17% versus $14,147 with 12.19% interest.


1) 36 mo. car loan term with 600 Credit Score = $1,448 additional out-of-pocket on average . That same $10,000 used car would receive a high 15.7% interest rate with a 600 credit score or an average interest rate between 6-12%. Over the same 36-month time, the total cost would only be $12,603.24 with a high interest rate or $11,448 with a median average interest rate of 9%..

2) 48 mo. car loan term with 600 Credit Score = $1,945 additional out-of-pocket cost on average. A used car costing 10k with a 600 credit score financed over 48 months with a high 15.7% interest would be a total cost of around $13,529.76. At the average median interest rate of 9%, you will end up paying $11,945.

3) 72 mo. car loan term with 600 Credit Score = $2,978 additional out-of-pocket cost on average. If you planned on taking out a car loan for 72 months at a high 15.7% interest, you would pay around $15,499 by the end of the term for a used vehicle with a price tag of $10,000 but with that average 9% interest rate, you will pay $12,978.


1) 36 mo. car loan term with 700 Credit Score = $622 more cost on average . If you were to finance the same car with a 700 credit score, the high interest rate would be around 5%. That would make the total cost only $10,789.56. With the average interest rate of 3.96%, you will pay $10,622 overall.

2) 48 mo. car loan term with 700 Credit Score = $829 more cost on average. At 48 months with a 5% interest rate, you total cost for the same vehicle would be around $11,054. At the average 3.96%, at the end of the term you will have paid $10,829 to own the car.

3) 72 mo. Car Loan Term with 700 Credit Score = $1,251 more cost on average. With a credit score of 700, you can own the $10,000 for about $11,595.60 after 72 months with a high 5% interest. You can own the same used car for $11,251.00 at an average interest rate of 3.96% for credit scores in the 700 range.


Used Car Loan Terms: Why Shorter Terms Help You Save


Out-of-Pocket Cost per Auto Term Life

Shorter loan terms help you save more money in the long run because less interest is accrued. No matter how high or low the interest rate may be, since the loan is paid off quicker, you will pay less money in interest. Let’s continue to talk about the same proposed used car in the aforementioned scenario, but look at car loan terms and how they affect the loan rates for used cars.


1) 500 Credit Score Financed at 36 Months = $1,990 more cost on average. With a 500 credit score and a high 17% interest rate over 36 months, you would pay almost $13,000 to own the vehicle. With an average interest rate of 12.19% for the 500 credit range, you would end up paying a total cost of $11,990.

2) 600 Credit Score Financed at 36 Months = $1,448 more cost on average. A used car selling for $10,000 with a high 15.7% interest rate would cost $12,603.24 by the end of the 36-month auto loan term. With the average interest rate for a credit score in the 600s being between 6-12%, a $10,000 used car at a median average interest of 9% would see a total cost of $11,448 after 36 months.

3) 700 Credit Score Financed at 36 Months = $622 more cost on average. If you were to finance the same car with a 700 credit score over 36 months, a high interest rate would be around 5%, which would make the total cost only $10,789.56. With an average interest rate around 3.96%, you should expect a total cost of $10,622.


1) 500 Credit Score + Financed at 48 Months = $2,685 more cost on average. The total cost of a $10,000 used car would be around $13,850.00 at the end of 36 months with a 500 FICO score and high 17% interest rate. With an average interest rate of 12.19% for the credit range in the 500s, the total cost would be $12,685.

2) 600 Credit Score + Financed at 48 Months = $1,945 more cost on average. At a high 15.7% interest rate and 600 credit score over 48 months; the total used vehicle cost would be around $12,603.00. With a credit score in the 600 range, you will see average interest rates from 6-12%. With an average median interest rate of 9%, the total cost would be $11,945.

3) 700 Credit Score + Financed at 48 Months = $829 more cost on average. At a high 5% interest rate and 700+ credit score over 48 months; the total cost would be around $11,105.00. Credit scores over 700 see an average interest rate between 3.85% and 4.07%. With a median average interest rate of 3.96%, expect the total cost to be $10,829.


1) 500 Credit Score + Financed at 72 Months = $4,147 more cost on average. At a high 17% interest rate and 500 credit score over 72 months; the total cost would be around $16,017.00. For the average rate of 12.19%, you will see a cost near $14,147.

2) 600 Credit Score + Financed at 72 Months = $2,978 more cost on average. A high 15.7% interest rate and 600 credit score over 72 months makes the total cost around $15,500.00. At the average interest rate of 9%, the cost would be $12,978.

3) 700 Credit Score + Financed at 72 Months = $1,251 more cost on average. With a credit score of 700 and high 5% interest rate, you can own the $10,000 car for about $11,595.60 after 72 months. With this credit score range, the average interest would sit around 3.96% making the total cost $11,251.



Used Cars for Sale at Phil Long Dealerships

At Phil Long Dealerships, we are experts on loan rates for used cars. We do everything we can to get you behind the wheel of a vehicle you love at the best possible interest rate for your particular situation. Good credit, bad credit, doesn't matter. We can work with you to figure out the best way to get your monthly payments down and keep your interest rates low. Stop by today for a test drive and to find out the best used car loan rates we can offer you. Browse our used car inventory below while you wait for your appointment.

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Phil Long Dealerships

1212A Motor City Dr
Directions Colorado Springs, CO 80905

  • Sales: (719) 387-5744
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