What Is a Good Interest Rate on a Used Car?

The good news for those purchasing a used car in 2023 is that they’re a lot more affordable this year than they were in 2021 and 2022. Used car prices have come down quite a bit over just the last few months. But even still, not everyone who is in the market for a used car is going to be able to buy it outright with cash. You may very well need to take out a loan to purchase a used car.

If you’re going to apply for a car loan to invest in a used vehicle, you should try to get the best interest rate on this loan that you possibly can. The interest rate on a used car loan is going to play a huge part in how much a used car will cost you over time. Continue reading to find out what a good interest rate on a used car should be.

What Is the Average Interest Rate for a Used Car Loan?

We should start off by letting you know that the average interest rate for a used car loan is almost always changing. Interest rates for car loans will go up and down over time depending on a bunch of key factors, but as of right now, the average interest rate for a used car loan is right around 10%. This rate is a little higher than the historical average, but interest rates on all kinds of loans have increased over the last six months due to the current state of the economy.

That being said, the average interest rate for a used car loan isn’t necessarily what you should be chasing. You want to try to get your hands on what would be considered a good interest rate on a used car loan if you can.

What Is a Good Interest Rate for a Used Car Loan?

If you’re only able to qualify for the average interest rate on a used car loan, it won’t be the end of the world. But if you have a great credit score, you should be able to do better than that. As long as your credit score is above 700, you can likely get access to an interest rate for a used car loan that will be just 8% or 9%. It’ll all depend on where exactly your credit score falls.

If, for example, you happen to have a credit score that’s above 750, you could be looking at getting an interest rate that’s well below the average interest rate for a used car loan. You could potentially save yourself a whole lot of money by securing an interest rate for a used car loan that’s this low.

What Is a Bad Interest Rate for a Used Car Loan?

If you don’t have the best credit score in the world, you might not be able to qualify for anywhere close to the average interest rate for a used car, let alone a good interest rate for one. If you have a low credit score, you could be looking at getting an interest rate at 15%, 20%, or higher. A bad interest rate like this is going to increase the cost of a used car substantially. It might even put a used car well outside of your price range if you aren’t careful.

How Can You Get a Better Interest Rate for a Used Car Loan?

If you apply for a used car loan and you find that you only qualify for a bad interest rate for it, you might have options as far as bringing it down. First and foremost, you can try to apply for a used car loan in other places. You might have better luck getting your hands on a lower interest rate through a different lender. But that isn’t the only option you’ll have.

Outside of looking elsewhere for a used car loan, you can also spend a few months trying to improve your credit score so that you’re able to qualify for a better interest rate for a used car. You can do this by disputing any errors you find on your credit report, getting current with any debt payments you’re behind on, and eliminating at least some of your debt altogether. These things can make it possible for you to get a good interest rate for a used car loan.

Why Is It Important To Get a Good Interest Rate for a Used Car Loan?

We’ve done our best to emphasize the importance of getting a good interest rate on a used car loan. But we want to make sure that it makes complete sense to you before we wrap things up. So, let’s take a closer look at how obtaining a used car loan with a good interest rate will affect you in a positive way.

Let’s say you buy a used car for $18,000 and get an 8.85% interest rate on it. With a relatively good interest rate like this, you’ll have monthly payments that will be about $370 when you aim to pay off a used car over five years. You’ll end up paying just under $4,500 over those five years in interest.

Now, let’s say you buy that same used car for $18,000 and get a 20.83% interest rate on it, which wouldn’t be a very good rate. In this case, you’re going to pay about $485 each month over five years and end up paying more than $11,000 in interest. In both cases, you’ll walk away with a title to the same car after five years, but you’ll obviously save so much money by getting an 8.85% interest rate as opposed to a 20.83% interest rate.

Let Us Help You Get a Good Interest Rate on a Used Car Loan

If you’re in the market for a used car, AutoCenters Herculaneum here in Missouri can help you find what you’re looking for. We have a large selection of used cars, trucks, and SUVs for you to check out and test-drive. We can also help you get the financing you’ll need to purchase one of our used cars. And we’ll work hard on your behalf to get you qualified for a used car loan that’ll come with an interest rate that’s as low as we can get it.

Contact us now to speak with someone from our talented team about financing a used vehicle.

ow interest rates stock photo by Simon Cunningham is licensed with CC BY 2.0