What is a Good Interest Rate on a Car Loan? Know the Factors

   

Know the Factors

If you're planning to finance a vehicle in 2026, understanding car loan interest rates can help you determine whether you're getting a competitive offer. Whether you're shopping for a new or used vehicle in Hot Springs, AR, your credit profile, vehicle, loan term, and lender can all affect your rate.

 

What Is a Good Interest Rate on a Car Loan in 2026?

There is no single “good” interest rate for everyone. A competitive rate depends on factors such as your credit profile, loan term, and whether you're financing a new or used vehicle. According to Experian's Q1 2026 data, average auto loan APRs were:

• New-car loans: 6.39%
• Used-car loans: 11.43%

Borrowers with excellent credit may qualify for rates well below these averages, while those with lower credit scores typically receive higher offers. Manufacturer promotional financing, including 0% or below-market APR offers, may also be available, but these offers generally require excellent credit and may be limited to specific vehicles or loan terms.

Remember, these averages are benchmarks, not guaranteed offers.

 

Average Car Loan Interest Rates by Credit Score

Your credit score is one of the most important factors in determining your car loan interest rate. Experian's Q1 2026 averages include:

   

These figures are averages; your exact rate will depend on your credit profile, lender, vehicle, loan terms, and more.

   

What Is the Difference Between Interest Rate and APR?

The interest rate represents the cost of borrowing money, while APR includes the interest rate plus certain finance charges and fees. When comparing auto loan offers, looking at APR can provide a more complete picture of your financing costs.

 

What Factors Affect Your Car Loan Interest Rate?

Several factors can affect the rate you're offered, including:

• Credit score and history: Stronger credit generally leads to lower rates.
• New vs. used vehicle: Used-car loans typically have higher average rates.
• Loan term: Longer terms can lower monthly payments but increase total interest.
• Down payment: A larger down payment lowers the amount financed and may improve your loan-to-value ratio, potentially helping you secure better terms.
• Vehicle age: Older vehicles may have different rates or lending requirements.
• Lender: Banks, credit unions, and dealerships may offer different terms.
• Financial profile: Income, existing debt, and other factors can affect approval and rates.

 

How Can You Get a Lower Car Loan Interest Rate?

To potentially secure a better rate:

• Improve your credit and address credit-report errors.
• Compare offers from multiple lenders.
• Consider getting preapproved before shopping.
• Make a larger down payment when possible.
• Choose a loan term that fits your budget without unnecessarily extending repayment.
• Check whether you qualify for manufacturer financing offers.
• Consider a qualified co-signer if appropriate.

 

What Is the Best Car Loan Term?

Common auto loan terms include 36, 48, 60, 72, and 84 months. Longer terms generally reduce monthly payments but increase the total interest paid. Whenever possible, choose a term that comfortably fits your budget while limiting your overall financing costs.

 

FAQs

• What is a good interest rate for a car loan? A competitive rate depends on your credit, vehicle, lender, and loan term. Q1 2026 averages were 6.39% for new vehicles and 11.43% for used.
• Is 5% a good car loan rate? Generally, yes. A 5% APR is below the Q1 2026 average for new-car loans, although borrowers with excellent credit may qualify for even lower rates.
• Is 7% a high interest rate for a car? It's above the Q1 2026 new-car average but below the average used-car rate.
• What interest rate can I get with a 700 credit score? The 661–780 credit tier averaged 6.23% for new and 8.77% for used vehicles in Q1 2026.
• Can I refinance my car loan if rates fall? In many cases, yes. Refinancing may be an option if rates decrease or your credit improves.

 

Explore Auto Financing at Riser Lincoln

Our finance team at Riser Lincoln can help you explore available financing options and better understand the factors that may affect your rate. Visit us in Hot Springs, AR to discuss your options and find a financing solution that fits your needs.

Note: Interest rates fluctuate over time. The averages referenced here are based on Experian's Q1 2026 data and are not guaranteed financing offers.