Auto Loan Rates

Having a reliable car is a necessity for many Americans, but it can be difficult to find the right vehicle—let alone deal with the stress of securing an auto loan! Here at Indiana Members Credit Union (IMCU), we know how frustrating it can be to try to figure out the loan process. In this short guide, we cover all the information you need to know about auto loan rates, from what they are to how to get a good one. Let’s get started so you can be on your way to your new (or new-to-you) vehicle in no time.

What Are Auto Loan Rates?

Auto loan rate can refer to either the APR (annual percentage rate) or the interest rate of your car loan. The difference between these two terms is simple: the interest rate is the percentage of money you’ll pay each year in interest. The APR includes the interest rate and all the other additional fees your lender may charge. These fees vary depending on the lender, from paperwork fees or costs that the lender has to state-specific taxes. 

For example, if you secure a 60 month car loan for $30,000 with an interest rate of 6%, you will end up paying a total $34,799.09 after all of your payments are completed. Your monthly payment for 60 months would be $579.98 each month. However, your APR would reflect a more accurate payment because it would include all of the fees. Your APR on the same loan might be 6.45%. This APR shows your true payment, reflecting that you will end up paying a total of $35,176.94 and your monthly payment will actually be $586.28. 

In general, a lower number for the interest rate and the APR is preferable. However, APR is a better indicator of your actual costs. When shopping around for an auto loan, you should compare the APR from different lenders rather than looking at just the interest rate. Lenders can have the same interest rate but different APRs because of the variety of fees they charge. At IMCU we don’t charge an auto loan fee, so the interest and the APR rates are the same!

Who Sets Loan Rates?

Each individual lender sets their own loan rate using a variety of information to determine how high or low it is. However, lenders base their rate on the benchmark rate set by the United States Federal Reserve. Your credit score is the main factor that lenders consider, but other variables that can influence your rate include: 

  • Income
  • Debts
  • Down payment
  • Loan amount
  • Type of vehicle
  • Age of vehicle
  • Condition of vehicle
  • The state you live in
  • The Federal Reserve rate

Even the time of year can play a role—when car sales slow down in December, some lenders will lower APR to try to drive sales.  

Is There a Difference Between New Car Loan Rates and Used Car Loan Rates?

Yes, there is. New car loan rates are typically lower than used car loans. This is because the value of new cars is easier to determine so the rates can be accurately matched to the value. The value of used cars is more difficult to pin down, so rates tend to be a bit higher in order to compensate for the uncertainty. At IMCU, rates are the same for new and the previous two year’s models.

What Credit Score Do You Need for an Auto Loan?

There is no minimum or maximum number that your credit score must be at to get an auto loan. However, if your credit score is lower, then your APR will be higher. For low credit scores, lenders may require a cosigner in order to secure the loan. If your credit score is higher, then your APR will be lower and you will get a more favorable rate. Here at IMCU, our loan officers will work with you to help you understand all of your options no matter what your credit score is.

To better understand how credit scores affect your loan rates, let’s take a look at the average car loan interest rate by credit score. These insights come from Experian’s State of the Automotive Finance Market from Q1 of 2022:

Average New Car Loan Interest Rate

Credit score range

Average interest rate 

300 to 500 


501 to 600 


601 to 660 


661 to 780 


781 to 850 


Average Used Car Loan Interest Rate

Credit score range

Average interest rate 

300 to 500 


501 to 600 


601 to 660


661 to 780 


781 to 850 


As you can see, the higher your credit score, the lower the average interest rate. Keep in mind that these are just averages—your individual rate will vary depending on your lender. To see IMCU’s current rates, visit our website

What Is a Good Interest Rate on a Car Loan Right Now?

The average car loan interest rate in 2022 is around 4% for new cars and 8% for used cars based on the Experian data above. A good interest rate will be at or below the average. Keep in mind that APR is a better gauge of what you’ll actually pay since interest rates don’t include fees. What is considered a high interest rate for a car loan?

Any interest rate that is over the average for your credit score range would be a high interest rate.

What are the lowest auto loan rates?

The lowest car loan rates you may see are 0%. These are usually offered by dealerships on new vehicles and can seem like a really great deal. However, there are a few things you should consider before signing up for a 0% interest rate auto loan. 

First of all, the dealership is still making their money, just in a different way. They make money on the car itself rather than the interest. These loans are often used as a marketing tactic to move older inventory or to get sales when car buying slows down. 

Secondly, these 0% interest loans are usually quite difficult to qualify for. If your credit score isn’t top notch, you probably won’t be able to secure one of these loans. 

Finally, with no-interest loans, you most likely will not be able to negotiate the price of the car or receive any incentives like cashback rebates. If you do qualify for a 0% loan, it’s important to do the math to see if this loan is actually worthwhile or not. Although 0% seems like one of the best car loan rates today, the truth is that these loans can end up costing you more in the long run than a loan with a low interest rate.

How Do You Get a Good Car Loan Rate?

Here are some tips for securing a good car loan. In general, you should: 

  • Work on your credit score- Your credit score is typically the single most important factor that determines your APR. Paying off your credit card balances strategically, reviewing your credit report and disputing any mistakes, and other tactics can help you bring your credit score up. In fact, at IMCU, our loan officers are happy to sit down with you and discuss personalized strategies for building credit. 
  • Save for a down payment- A larger down payment may help you qualify for a lower APR on your auto loan. Trading in your old vehicle may be a solution for boosting your down payment, depending on the value of your previous car. 
  • Get Pre-approved- Apply online at, visit a branch or just give us a call.
  • Find the right vehicle for you and your lender- As we’ve discussed, new vehicles will usually have a lower APR. However, if you’re in the market for a used car, be sure to consider all the factors like the age of the vehicle, mileage, and wear and tear. Older cars or those in worse condition will usually have a higher APR. Be sure to look for the most suitable vehicle for you and your lender. 

Do you already have a less-than-ideal car loan? Don’t worry, there are still steps you can take! You can: 

  • Pay off your loan early- If your lender allows you, paying off your loan early can reduce the amount of interest you would pay over the course of a longer loan period. 
  • Refinance- Refinancing your auto loan can help you get a better APR. In general, it can be wise to refinance if your credit car score has improved, interest rates have dropped, or if you would like to lengthen or shorten your loan term. Here at IMCU, we work closely with many people who are ready to refinance, helping them save money and get an auto loan that fits their unique needs. 

Which Lender Is Best for a Car Loan?

There are many options for lenders out there, but one of the best options is to go with a credit union. Credit unions are nonprofit entities that are owned by the members, not by stockholders. In fact, Credit Karma reports that getting a car loan from a credit union can provide you with lower interest rates, smaller minimum-loan requirements (most for-profit lenders require larger loan amounts), and a better chance of loan approval. The lowest credit union auto loan rates can be as much as 1% to 2% lower than the rates offered by banks and will typically beat any dealership loan as well. This Is due in part to the unique structure of credit unions. Let’s take a quick look at IMCU’s background to illustrate this point: 

Established as a member-owned, not-for-profit financial institution in 1956, IMCU’s mission and values have long been to better the lives of those we serve, through our credit union philosophy of People Helping People. Through all decisions and efforts, IMCU prides itself on its ability to stay true to its roots of Keeping It Simple. We offer our members valuable products and services, with friendly, competent service, and provide the most advanced technology possible.

One example of the technology we provide is an auto loan calculator we have to help you understand your car loan. IMCU offers a few different tools for your convenience: 

  • Alternative Payment Frequencies - This tool lets you enter information such as your loan amount, interest rate, number of payments, and payment frequencies to determine principal balances by payment, the total of all payments made, and the total interest paid. Use this calculator when you’re trying to decide between different lenders, payment structures, or loan terms.
  • Amortizing Loan Calculator - You can put your loan amount, interest rate, and loan term in months to figure out what your monthly payment will be. You can also use this calculator to determine how much of a loan you can afford. Just enter your desired monthly payment, interest rate, and loan term in months to see what your budget will be.
  • Existing Loan Calculator - If you already have a loan, you can use this calculator to find your remaining loan balance based on the number of payments you have left to make. If you are considering refinancing your auto loan, this tool will help you understand your current standing to compare to the new rate.

Indiana Member Credit Union: Auto Loans That Drive You Forward

Whether you need an auto loan for a new or used vehicle or are looking to refinance your current car loan, we’re here to help. Our flexible options help you move forward in your car buying journey, getting you on the road as quickly as possible. With IMCU, you’ll find People Helping People—we provide various loan options, expert auto loan officers, and even an Auto Advisor Program so you can be fully informed during this process.

Ready to start exploring your options? Explore our current auto loan rates and contact us if you have any questions.