)
)
Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
)
)
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
)
)
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
John Leach is a licensed insurance agent who reviews and fact-checks articles for Compare.com. John has several years of experience reviewing and editing various insurance topics, and he also holds a valid personal lines producer license from the California Department of Insurance (NPN #20461358).
Updated
At Compare.com, it’s our mission to give you the tools to find the best (and most affordable) insurance for your unique needs and budget. We strive to provide information that’s helpful, clear, and unbiased, and we believe that comparing insurance companies should never put you at risk of spam. Our editorial team — which is made up of experienced writers, editors, insurance agents, and data analysts — has spent thousands of hours researching and creating the coverage overviews, side-by-side comparisons, and detailed reviews you see across our site.
While we make money through partnerships with some of the brands we discuss in our articles, our editorial team operates 100% independently, and these partners never influence or affect the topics, reviews, ratings, or recommendations we provide. We never guarantee favorable reviews or mentions in exchange for compensation from any brands or partners, and we uphold strict editorial standards to ensure our content is always independent, truthful, and unbiased.
A used car loan is a type of auto financing that helps you buy a pre-owned vehicle. You borrow a set amount and repay it in fixed monthly installments that include both principal and interest.
Used car loans typically come with higher interest rates and shorter terms than new car loans. So, although you might pay more in interest, the lower purchase price can still make a used vehicle more affordable over the life of the loan.
This guide breaks down rates by credit score, how and where to get the best used car loan, and how to boost your approval odds.
Typical APRs range from around 7.70% with excellent credit to 21% or higher with poor credit.
A larger down payment can improve your approval odds and lower your interest rate.
Longer loan terms lower your monthly payment but increase the total interest you pay over time.
Your credit score is a major factor lenders use to determine your interest rate.[1] Higher scores show a strong repayment history and less borrowing risk, so lenders offer more competitive rates. But a lower score suggests you’re more likely to default on your loan payments, which usually leads to higher rates.
Here’s how the difference plays out for a $20,000 loan over 60 months with excellent and poor credit:
With excellent credit, at 7.7%, your monthly payment would be about $403, with a total interest cost of almost $4,160.
With poor credit, at 21.85%, your loan payment would be about $550 per month, with a total interest cost of $13,040.
Interest rates fluctuate with Federal Reserve policy and market conditions, and in 2026, they’ve been inching higher.
The table below shows typical annual percentage rates (APRs), monthly payments, and total interest by credit tier.
Credit Score Range  | Typical APR2 | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 800+ (Excellent) | 7.70% | $403 | $4,160 |
| 740–799 (Very good) | 9.98% | $425 | $5,485 |
| 670–739 (Good) | 14.49% | $471 | $8,228 |
| 580–669 (Fair) | 19.42% | $523 | $11,407 |
| <580 (Poor) | 21.85% | $551 | $13,040 |
Rates can vary by over 14 percentage points across credit tiers, which significantly changes both your monthly payments and total loan costs.
)
Use this step-by-step process to get a used car loan:
Check your credit score. Knowing your score can give you an idea of what APR you’ll likely qualify for.
Set a budget. Don’t forget to factor vehicle maintenance and car insurance costs into your monthly budget.
Get pre-approved. Pre-approval shows what terms you qualify for without affecting your credit score.
Compare lenders. Check rates at banks, credit unions, and online lenders to find the best terms.
Finalize the loan. Complete the application process and review the terms carefully before signing.
Comparison shopping is one of the most important steps. It can significantly lower your rate and help you save money over the life of the loan.
See personalized loan offers from multiple lenders and find the best rate.
Lenders look at several factors when setting your rate: credit score, income, debt-to-income (DTI) ratio, loan amount and term, down payment, and vehicle type. Strong credit, stable income, and low debt signal lower risk, which leads to better rates.
Each lender weighs rating factors differently, so it’s worth shopping around. Even a 1% lower APR can save you hundreds of dollars over the life of the loan.
These tips could help you get a better rate:
Compare offers within a 45-day window to minimize the effect on your credit score.
Make a larger down payment or trade in a vehicle to reduce lender risk.
Choose a shorter loan term if you can afford higher payments.
Ask lenders about rate discounts, such as auto pay or existing customer perks.
Pay attention to the term length when comparing loan offers.
Get prequalified to find the best loan options.
Use a loan calculator to ensure you get the best deal.
Lenders prefer borrowers who put money down because it reduces the loan-to-value (LTV) and their risk. The LTV is the percentage of the car’s value you’re borrowing. A higher down payment can lower your APR since you’re borrowing less relative to the vehicle’s value.
Here’s an example of how a $20,000 used vehicle purchase with a 60-month loan term might look.
Down Payment | Loan Amount | Estimated APR | Monthly Payment |
|---|---|---|---|
| 0% ($0) | $20,000 | 15% | $476 |
| 10% ($2,000) | $18,000 | 12% | $400 |
| 20% ($4,000) | $16,000 | 9% | $332 |
A larger down payment lowers your monthly costs but requires more up-front cash, while a smaller one keeps money in your savings account but increases your monthly payment. It also increases the total interest you pay over time, since you’re borrowing more.
)
Loan terms for used cars usually range from 36 to 84 months. The shorter terms of 36 to 48 months usually come with higher monthly payments but lower total interest cost.
Longer terms of 72 to 84 months offer lower monthly payments but increase total interest costs and risk. Longer terms are riskier for a used vehicle because it may depreciate faster than you pay off the loan. It can leave you “upside down,” meaning you owe more than the car is worth.
So if you total your vehicle, someone steals it, or you just want to replace it with a new one, you may end up having to pay off a large amount before you can buy your next car.
In general, choose the shortest term you can comfortably afford to minimize interest costs. Use a payment calculator to see which term offers the best payment options for your budget.
The car-buying process typically starts at a dealership, but borrowers have multiple options for used auto loans. It’s important to compare rates from at least three or four lenders to find the best rate and terms. Getting pre-approved also gives you better negotiating power and a clearer idea of what you can afford.
Established financial institutions
Low rates for strong credit
In-person support
Stricter requirements
Slower processing
May limit to dealer purchases only
Traditional banks are the most common lender type for used car loans. Banks usually favor borrowers with good credit and stable income. Loan applications can take a few days to process, and rates vary widely by lender.
Some banks may restrict used auto loans to vehicles under a certain age or mileage, for example, less than 10 years old and 125,000 miles.
Lower average rates
May offer longer loan terms
More flexible lending criteria
Membership required
Fewer physical branches
Limited digital tools
Credit unions tend to offer lower interest rates and more flexible approval criteria than banks. You have to become a member to qualify, but it’s usually easy to join. Since members own the credit union and it operates as a not-for-profit, you typically get better customer service. Approval chances are generally higher, and funding can typically happen within a few days.
Fast approvals
Accessible for lower credit
Typically offer auto-pay discounts
Some lenders charge origination fees
Limited customer support
Rates are often higher
Online lenders cater to a wide range of credit profiles, including borrowers with lower scores. Approvals often happen the same day, though rates can be higher than those from banks or credit unions. While online banking marketplaces make comparison shopping easier, some lenders may charge application or origination fees.
Convenient one-stop financing
Same-day approval
Promotional offers sometimes available
Higher average rates
Pressure to accept terms
Limited transparency
Dealership financing offers convenience by combining the car-buying and loan application processes, usually with same-day funding. Dealers work similarly to online marketplaces by comparing multiple lenders or offering in-house financing.
Since dealers want you to buy a car, they can often help you connect with lenders willing to work with a wide range of credit profiles, even if you have poor credit. Rates can be higher, depending on the lender and your credit profile. Dealers may pressure you to accept terms that may not be in your best interest to complete the sale.
Used and new car loans differ in rates, risk, and overall cost. Loans for new vehicles typically come with lower APRs because they tend to be more reliable, hold value better, and qualify for manufacturer incentive rates. They also come with a manufacturer’s warranty, which can help cover major repairs and reduce unexpected costs.
Lenders usually offer higher interest rates on used car loans, especially for older, high-mileage model years. But despite the higher APR, used vehicles cost less than new ones, which can lower your total cost.
A used car makes the most financial sense after the first few years. At that point, it has already taken its biggest depreciation hit but can still offer reliability and may have warranty coverage, depending on mileage. Certified pre-owned vehicles may cost a bit more, but they’re usually in great condition and often come with a dealer warranty.
The table below compares key differences between used and new car loans, including rates, costs, and coverage.
Factor | Used Car Loan | New Car Loan |
|---|---|---|
| Typical APR | 7.70%–21.85% | 4.66%–16.01% |
| Estimated monthly payment | $403–$551 | $374–$486 |
| Total cost over 60 months | $4,160–$13,040 | $2,459–$9,188 |
| Warranty coverage | Possible (depends on model year and mileage) | Manufacturer’s warranty |
Although a higher APR can increase the total interest on a $20,000 used auto loan, you’d need a much larger down payment if you plan to finance only $20,000 on a new car. They cost nearly twice as much as the average used vehicle.
Consider taking one or more of the following steps to increase your chances of approval and lower your APR:
Check your credit report for errors. Fixing errors can take up to 45 days, so keep that in mind as you plan your purchase.
Improve your credit score before applying. Pay your bills on time and reduce your debt load. Even a few months of consistent payments can help improve your credit.
Apply with a co-signer. If you have a poor or limited credit history, a co-signer with good credit can help improve your chances of approval.
Save for a down payment. Putting money down makes you a less risky borrower. This can take months, so start early.
Avoid new credit applications. When you apply for different loan types, like credit cards or personal loans, it can add a hard inquiry to your credit report. It can briefly lower your score and make you appear riskier to lenders. Try to avoid opening new lines of credit for a few months before applying for a used car loan.
Most lenders require full-coverage insurance, including comprehensive and collision coverage, on financed vehicles. It protects the lender’s investment in your car. It costs more than liability-only insurance, which doesn’t cover your vehicle, only damage and injuries you cause to others.
Let’s say a full-coverage policy costs $150 per month and a liability-only policy costs $80. That’s an extra $70 per month for full coverage, which adds $4,200 to your total cost over a 60-month loan.
Try these tips to lower car insurance costs:
Bundle auto and home insurance for multi-policy discounts.
Avoid tickets and accidents.
Compare quotes from multiple insurance companies.
Choose a higher deductible.
Allow your insurer to track your driving habits for safe driving discounts.
Ask about other available discounts.
Consider liability-only coverage if you own your car outright.
Compare lenders, rates, and terms side by side.
Here are answers to some of the most common questions people ask about used car loans.
Borrowers with fair to excellent credit may see rates ranging from about 7% to the mid-teens, depending on their credit profile and the lender. The lowest common rates as of this writing hover around 7%, but many factors can influence the rate offers you receive.
At 10% APR for 60 months, a $30,000 car loan would cost around $637 per month. Higher rates will increase your monthly payment. A longer term can lower it, but it would increase the total interest you pay.
Put down a larger down payment and buy a less expensive used vehicle. Compare multiple lenders to find the best rate. Credit unions often offer the lowest rates, but you have to meet eligibility requirements to qualify.
You can usually get 0% financing only on new cars through dealership financing. Some manufacturers offer 0% financing on certain vehicles to sell them off quickly. You usually need excellent credit and low debt to qualify.
Most lenders want you to have good or better credit, which means a 670 credit score or higher. Some online lenders or dealers will work with borrowers with poor credit, but you’ll usually get the highest interest rates.
)
Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
John Leach is a licensed insurance agent who reviews and fact-checks articles for Compare.com. John has several years of experience reviewing and editing various insurance topics, and he also holds a valid personal lines producer license from the California Department of Insurance (NPN #20461358).
