A good credit score can save you as much as $10,000 on a car. A bad score can cost you that much.
Your credit score largely determines how much interest you pay on a car loan. And interest rates are running high.
The average new car loan was $40,366 in 2023. But the total cost of the loan can range from $46,419 to $57,339, depending on the interest rate, according to an analysis by the personal finance site MarketWatch Guides.
The average used car loan was $26,685. Factor in the interest, though, and the total cost of that loan ranges from $32,205 to $43,812.
Interest rates on car loans are as high as they’ve been in years. The average rate on a new car ranges from 5.4%, for those with the highest credit scores, to 15.6%, for those with the weakest credit, according to Experian. For used cars, the average interest rate ranges from 6.8% to a whopping 21.6%, depending on your credit score.
Learn more: Best current CD rates
What is a good credit score for a car loan?
Even a consumer with poor credit can get a car loan. But the loan will probably come with a sky-high interest rate, dramatically increasing the full cost of the car.
“If you have a low interest rate, you’re going to potentially pay thousands of dollars less than if you have a high interest rate,” said Kimberly Palmer, a personal finance expert at NerdWallet.
The wide spread in interest rates on car loans reflects a complicated calculus. If you have a lower credit score, auto lenders think you’re a bigger risk….
