Auto loans remain one of the most common ways for buyers to finance new and used vehicles in 2025. With interest rates still fluctuating, borrowers are weighing their choices between banks, credit unions, online lenders, and dealership financing.
Auto Loan Rates by Credit Score
The cost of financing largely depends on credit history. According to industry reports from early 2025, average rates are:
- Superprime (781–850): New cars 5.18%, Used cars 6.82%
- Prime (661–780): New cars 6.70%, Used cars 9.06%
- Nonprime (601–660): New cars 9.83%, Used cars 13.74%
- Subprime (501–600): New cars 13.22%, Used cars 18.99%
- Deep subprime (300–500): New cars 15.81%, Used cars 21.58%
Loan Terms and Payments
Auto loans are typically repaid over 24 to 84 months. Shorter terms mean higher monthly payments but lower total interest. For example, a $35,000 car loan at 9% APR would cost about $1,113 per month on a 36-month term, while the same loan stretched to 72 months would lower payments to $631 but add nearly $10,424 in total interest.
New vs. Used Car Financing
Rates for new cars are often lower than for used cars, since new vehicles serve as stronger collateral. Buyers putting down larger initial payments also tend to receive more favorable loan terms.
Types of Auto Loans Available in 2025
- New car loans for current or prior-year models not yet titled.
- Used car loans for vehicles older than one year, sometimes with lender restrictions.
- Refinance loans that replace an existing loan to lower payments or reduce interest.
- Cash-out refinancing allowing borrowers to tap into equity built in the vehicle.
- Lease buyout loans for those choosing to purchase their leased cars.
- Bad credit loans for borrowers with limited or low credit history.
- First-time buyer programs that provide flexible entry-level terms.
Pre-Qualification vs. Preapproval
Borrowers often start with pre-qualification, which uses a soft credit check to estimate possible terms. Preapproval, by contrast, involves a hard inquiry and gives stronger leverage at dealerships, showing a buyer is conditionally approved for financing.
Key Factors That Influence Loan Rates
- Credit score and borrowing history
- Income and employment stability
- Vehicle age and price
- Loan amount and repayment length
- Down payment size
Looking Ahead
As 2025 continues, experts suggest borrowers compare multiple offers before committing to a loan. With shifting interest rate trends, pre-shopping can help secure more manageable monthly payments while avoiding higher long-term costs.
