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In 2026, average auto loan rates for new cars range from 5-8% APR for borrowers with good credit (670+), and 9-14%+ for fair or poor credit. Credit unions typically offer 1-2% lower rates than dealerships. The best rates (3-5%) go to buyers with excellent credit (740+) who shop around before visiting the dealer.

The standard recommendation is 20% down for new cars and 10% for used cars. A larger down payment lowers your monthly payment, reduces total interest paid, and prevents being "underwater" (owing more than the car is worth). Cars depreciate fast — a new car loses 20-30% of its value in the first year, so putting less than 10% down can quickly lead to negative equity.

Longer loan terms lower the monthly payment but significantly increase total interest paid. A $30,000 loan at 7% for 60 months costs $5,940 in interest. The same loan at 84 months costs $8,587 — nearly $2,650 more. You're also more likely to be underwater on the loan for longer. Most financial advisors recommend keeping auto loans at 60 months or less.

Always get a pre-approval from your bank or credit union before visiting the dealer. This gives you a baseline rate to compare against dealer financing. Dealers sometimes mark up the interest rate (called the "dealer reserve") and pocket the difference. With a pre-approval in hand, you can negotiate purely on price and either use your financing or accept dealer financing only if it's genuinely better.

For auto loans, APR (Annual Percentage Rate) and the interest rate are usually the same, unlike mortgages where APR includes fees. However, some dealers charge origination fees or documentation fees that effectively raise your true cost. Always compare the total amount financed and total cost of the loan across lenders, not just the interest rate or monthly payment.