What borrowers are paying: Q2 2026 averages by credit tier
Your credit score matters more than any other factor in the rate you're offered. Experian's quarterly data shows how much it matters:
| Credit tier (score) | Average new-car APR | Average used-car APR |
|---|---|---|
| Super prime (781–850) | 4.41% | 6.29% |
| Prime (661–780) | 6.15% | 8.81% |
| Near prime (601–660) | 9.71% | 13.93% |
| Subprime (501–600) | 13.52% | 19.10% |
| Deep subprime (300–500) | 16.11% | 21.62% |
Source: Experian, State of the Automotive Finance Market, Q2 2026 (published September 2026).
Across all borrowers, the average new-car loan in Q2 2026 was $43,610 at 6.35% APR, with a $765 monthly payment. The average used-car loan was $27,852 at 11.19%, with a $542 payment. Used-car rates run higher in every tier, so a cheaper used car does not always mean cheaper financing.
If your score sits just below a tier boundary, such as 655 instead of 661, a few months of on-time payments and lower card balances could move you into a better bracket. Our guide to credit score ranges explains how lenders read those numbers.
Lenders to compare, with published rates and terms
The lenders below are examples of the main types of direct lenders. They are listed by type, not ranked. Starting rates go to applicants with excellent credit, and most borrowers will be quoted more.
Credit unions
- Navy Federal Credit Union. As of October 7, 2026, its new-vehicle rates started at 3.89% for 12–36 months, 4.29% for 37–60 months and 4.59% for 61–72 months. Used-vehicle rates started at 4.79%, 5.29% and 5.39% for the same terms. Terms run up to 96 months on new vehicles, but anything over 84 months requires a vehicle with fewer than 7,500 miles and at least $30,000 borrowed. Membership is limited to people with a military, Department of Defense or National Guard connection and their families.
- PenFed Credit Union. LendingTree's 2026 review lists starting APRs of 4.19% for new and refinance loans and 4.79% for used, with terms of 36–84 months and loans up to $150,000. Anyone can join by opening a savings account with $5. The trade-off is that PenFed's lowest advertised rates require using its car-buying service.
Banks
- Bank of America. Bank of America offers terms of 48–72 months, with a $7,500 minimum ($8,000 in Minnesota). Preferred Rewards clients can get up to a 0.50% rate discount. It does not finance private-party sales or offer auto refinancing.
- LightStream (a division of Truist). LightStream lends $5,000 to $100,000 with no fees or prepayment penalties. Its quoted rates assume AutoPay, and paying by invoice adds 0.50 percentage points. Bankrate listed its auto purchase APRs at 9.99%–17.74% with AutoPay as of October 2, 2026, with a 660 minimum credit score. Because the loan is unsecured, LightStream can make sense for older or private-party cars that other lenders won't finance, but compare its rate against secured offers first.
Online lenders and marketplaces
| Lender | APR range | Terms | Loan amounts | Min. credit score |
|---|---|---|---|---|
| Carputty | 4.33%–14.07% | 4–6 years | $25,000–$250,000 | 680 |
| Tenet (EV and plug-in hybrid focus) | 5.99%–16.20% | 3–7 years | $15,000–$95,000 | 640 |
| myAutoLoan (marketplace) | From 6.49% | 2–7 years | From $8,000 | 600 |
| LendingClub (refinance) | 5.49%–24.99% | 2–7 years | $4,000–$55,000 | 300 |
Source: Bankrate auto lender comparison, rates as of October 2, 2026. Ranges are lender-advertised and include autopay or other discounts where offered.
Marketplaces such as myAutoLoan send your application to several lenders. That makes comparing easier, but read each offer separately, because the lender, not the marketplace, sets the final terms.
Dealer financing vs. getting your own loan
When a dealer arranges your loan, it acts as a middleman. The CFPB explains that rates through a dealer are often higher because the dealer can offer you the lender's "buy rate" plus extra interest that pays the dealer for arranging the loan. That markup is usually negotiable, but only if you know what a fair rate looks like.
Dealer financing is not always worse. Automakers' finance arms sometimes run promotional APRs on specific new models, and a dealer may beat your preapproval to win the sale. The point of preapproval is to give you a number to compare against.
How to use preapproval
- Check your credit first. Look for errors on your reports before applying.
- Apply with two or three lenders in a short window. FICO counts multiple auto loan inquiries as one if they fall within 14 days under older scoring versions or 45 days under newer ones. Keeping it to 14 days covers both.
- Bring the best offer to the dealer. The CFPB notes that a preapproval gives you a rate, a term and a maximum loan amount. Ask the dealer to beat the rate on the same term.
- Negotiate the car price separately. Settle the price before you discuss monthly payments or financing. A low payment can hide a high price or a long term.
- Read the contract for add-ons. Service contracts, gap coverage and other products can be added to the amount financed. Each one should be a separate decision you agree to.
Long terms and negative equity
Stretching a loan to 72 or 84 months lowers the payment but increases total interest. It also keeps you owing more than the car is worth for longer. Edmunds data for Q1 2026 shows how common this has become:
- 30.9% of new-vehicle trade-ins carried negative equity, meaning the owner owed more than the car was worth.
- The average amount underwater was $7,183, the highest Edmunds has recorded for a first quarter.
- About one in four of those buyers (26%) rolled more than $10,000 of old debt into the new loan.
- Buyers carrying negative equity averaged 77.4-month terms, compared with 70.3 months for all new-vehicle loans. They also paid 7.9% APR on average, versus 6.9% for the market, and 43% of them took 84-month terms.
Rolling negative equity into a new loan means paying interest on a car you no longer own. If you're underwater, consider keeping the current car longer, paying down the balance, or putting cash toward the gap. If you finance a large amount with a small down payment, gap insurance can cover the difference if the car is totaled. Check whether your auto insurer offers it before buying it from the dealer. Our auto insurance guide covers coverage options.
What a loan really costs: worked example
Here is a $35,000 loan at different rates and terms. These are standard amortization calculations and leave out taxes and fees.
| Scenario | Monthly payment | Total interest |
|---|---|---|
| 4.41% (super prime average), 60 months | $651 | $4,064 |
| 6.15% (prime average), 60 months | $679 | $5,746 |
| 6.15%, 72 months | $583 | $6,942 |
| 6.15%, 84 months | $514 | $8,161 |
| 9.71% (near prime average), 60 months | $739 | $9,320 |
| 13.52% (subprime average), 60 months | $806 | $13,342 |
Source: MoneyVerge calculations using Experian Q2 2026 average new-car APRs.
Two lessons stand out. Going from 60 to 84 months at the same rate saves $165 a month but adds about $2,400 in interest. And moving from the subprime to the prime average saves about $7,600 on the same loan. If your credit is weak, improving it before you buy can be worth more than any negotiating tactic. Run your own numbers with our financial calculators.
The new car loan interest deduction (2025–2028)
The 2025 federal tax law created a deduction for interest on loans for personal vehicles. Based on the law and the IRS proposed regulations:
- Amount: up to $10,000 of interest per year, for tax years 2025 through 2028.
- Who can claim it: You don't need to itemize. The deduction is available whether you take the standard deduction or itemize.
- Income limit: It phases out above $100,000 of modified adjusted gross income ($200,000 for married couples filing jointly).
- Vehicle: It must be new (used cars don't qualify), with final assembly in the United States. It can be a car, minivan, van, SUV, pickup or motorcycle under 14,000 pounds gross vehicle weight rating, and must be used more than 50% for personal purposes. You can check where a vehicle was assembled with its VIN using NHTSA's VIN decoder.
- Loan: It must be taken out after December 31, 2024, and secured by a first lien on the vehicle. Leases don't qualify. A refinance keeps qualifying only up to the balance that was refinanced.
- Claiming it: You claim it on Schedule 1-A and report the VIN.
The deduction lowers taxable income. It does not reduce the loan rate. For a borrower in the 22% bracket who pays $2,000 of interest in a year, it is worth about $440. That helps, but it shouldn't be the reason to choose a longer loan or a pricier car. The IRS guidance was issued as proposed regulations, so confirm details with the IRS or a tax professional.
How to choose an auto lender
- Compare APR on the same term. A lower payment over a longer term is not a better deal.
- Check vehicle restrictions. Many lenders cap vehicle age or mileage. PenFed, for example, finances vehicles up to 125,000 miles.
- Look at fees and discounts. Autopay, membership and relationship discounts can lower the rate by a quarter to half a point. Find out whether a lower rate depends on using a specific buying service.
- Confirm prepayment terms. Paying extra principal shortens the loan only if there's no prepayment penalty.
- Plan to refinance if rates or your credit improve. Refinance lenders such as LendingClub publish their APR ranges, so you can check later whether a new loan would lower your rate.
If a car payment is squeezing your budget, start with our guide on how to make a budget before taking on a new loan.
Frequently asked questions
What is a good APR for a car loan right now?
It depends on your credit. In Q2 2026, Experian data showed average new-car APRs of 4.41% for super prime borrowers (781+), 6.15% for prime (661–780) and 9.71% for near prime (601–660). An offer at or below your tier's average is reasonable. Credit unions often advertise lower starting rates.
Is it better to finance through the dealer or a bank?
Get a preapproval from a bank, credit union or online lender first. The CFPB notes that dealer-arranged rates can include a markup over the lender's buy rate. If the dealer beats your preapproved rate on the same term, taking the dealer's offer is fine.
Does applying with several auto lenders hurt my credit?
Only slightly, if you do it quickly. FICO scoring treats multiple auto loan inquiries within 14 days (older versions) or 45 days (newer versions) as a single inquiry.
Can I deduct car loan interest on my taxes?
For tax years 2025 through 2028, you may deduct up to $10,000 a year of interest on a loan taken out after 2024 for a new, US-assembled personal vehicle. The deduction phases out above $100,000 of modified AGI ($200,000 joint). Used cars and leases don't qualify.
How long should a car loan be?
As short as you can comfortably afford. A $35,000 loan at 6.15% costs about $5,746 in interest over 60 months and $8,161 over 84 months. Longer terms also raise the chance you'll owe more than the car is worth.
What should I do if I owe more than my car is worth?
Avoid rolling the balance into a new loan if you can. Edmunds found buyers who did so in Q1 2026 financed $12,071 more than typical buyers and paid higher APRs. Keeping the car longer or paying down the gap first usually costs less.
Sources
- Experian – Average Car Loan Interest Rates by Credit Score (Q2 2026)
- CFPB – What is dealer markup?
- CFPB – Auto loans consumer tools
- Repairer Driven News – Edmunds: Three in 10 consumers are under water on car loans at trade-in
- Navy Federal Credit Union – Auto loan rates
- LendingTree – PenFed Auto Loan Review
- LendingTree – Bank of America Auto Loan Review
- LightStream – New car loan
- Bankrate – Compare auto loan rates
- myFICO – Rate shopping and credit inquiries
- Journal of Accountancy – Proposed regulations provide guidance on car loan interest deduction
- Iowa State CALT – Proposed regulations explain new deduction for personal car loan interest
Rates, fees and terms change often. Figures were checked in October 2026; confirm current details with the provider before you apply.