Is 10% a good APR for a car?
A 10% APR is good for credit cards and personal loans, as it's cheaper than average. On the other hand, a 10% APR is not good for mortgages, student loans, or auto loans, as it's far higher than what most borrowers should expect to pay. A 10% APR is good for a credit card. The average APR on a credit card is 22.15%.
According to Rachel Sanborn Lawrence, advisory services director and certified financial planner at Ellevest, you should feel OK about taking on purposeful debt that's below 10% APR, and even better if it's below 5% APR.
The law says that the most a lender can charge for an auto loan are about 16% APR, but some lenders get away with 25% or more. Your annual percentage rate (APR) for a car loan depends on your credit score and whether you want a new or used car.
That being said, if you have good credit and payment history, a good income, and a cosigner with a credit score of 750 or higher, you should not sign on that loan. However, if you do not have a cosigner, then an 11% to 12% interest rate is about right.
An interest rate under 5% is a great rate for a 72-month auto loan. However, the best loan offers are only available to borrowers who have the best credit scores and payment histories.
APR is an annualized rate. In other words, it describes how much interest you'll pay if you borrow for one full year. Let's say you borrow $100 at 10% APR. Over the course of one year, you'll pay $10 in interest (because $10 is 10% of $100).
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Good Credit Card APRs by Credit Score.
| Credit Rating | Score Range | Good Credit Card APRs |
|---|---|---|
| Good | 700–749 | 19% |
| Fair/Limited | 640–699 | 21% |
| Bad | 300-639 | 18% |
Those with higher credit scores pose a lower default risk to issuers, and they tend to land better interest rates. Even if you have a higher interest rate and carry a balance, you can pay less interest on your credit card debt if you make payments whenever you can.
Since the start of 2022, average vehicle interest rates have been on the rise: 1.77 percentage points for a 60-month new car loan and 1.78 percentage points for a 48-month used loan, according to a national Bankrate survey of rates. Higher interest rates are just one result of the Feds' goal to quell inflation.
Generally, yes, a 72 month car loan is bad. When you get a 72 month car loan, you're more likely to go upside down on your car loan, which leaves you in a vulnerable financial position. Avoid getting a 72 month car loan if you can. This might mean getting a cheaper car than you hoped for.
What is a good APR for a 2023 car?
| Company | Forbes Advisor Rating | Minimum rate |
|---|---|---|
| Consumers Credit Union | 4.2 | 5.54% |
| Digital Federal Credit Union (DCU) | 3.7 | 5.74% |
| USAA | 3.7 | 5.04% |
| Alliant Credit Union | 3.6 | 6% |
With a credit score of 600, 9% is a good interest rate on a car loan. In fact, the average interest rate for someone with a credit score of 600 is above 9%. If you improve your credit score within the coming months or years, you should consider refinancing the loan. You will likely qualify for a better rate.
A 15% APR on a car loan is astronomically high. At this level, most financial experts would agree that your money and time are better spent fixing your credit than adding more debt in the form of a car loan.
A good rate is generally somewhere between about 3% to 13%, give or take, depending on credit score. Learn more about the average new and used car loans based on credit scores and the APR, or Annual Percentage Rate, for that average.
“An APR of 20% is a bit steep, and you could probably get better financing terms from a bank or credit union. Dealerships tend to offer more expensive loans because of interest rate markups. When you choose to finance a car through a dealer, they basically shop for you by gathering offers from various lenders.
The total interest amount on a $30,000, 72-month loan at 5% is $4,787—a savings of more than $1,000 versus the same loan at 6%. So it pays to shop around to find the best rate possible.
- Make a full lump sum payment. ...
- Make a partial lump sum payment. ...
- Make extra payments each month. ...
- Make larger payments each month. ...
- Request extra or larger payments to go toward your principal.
In December of 2022, the Fed indicated that it expects the funds rate to fall to 4.1% by the end of 2024 after reaching the 5.1% mark by the end of 2023. If that holds true and the federal interest rate begins to fall, auto loan rates should start to drop shortly after.
If you had a 10% APR then you would owe $10 in interest on a loan of $100 if you leave the debt running for 12 months.
Converting APR to Monthly
For example, to determine the monthly rate on a $1,200 loan with one year of payments and a 10 percent APR, divide by 12, or 10 ÷ 12, to arrive at 0.0083 percent as the monthly rate.
Is 12% APR too high?
A low credit card APR for someone with excellent credit might be 12%, while a good APR for someone with so-so credit could be in the high teens. If “good” means best available, it will be around 12% for credit card debt and around 3.5% for a 30-year mortgage. But again, these numbers fluctuate, sometimes day by day.
With a credit score of 600, 9% is a good interest rate on a car loan. In fact, the average interest rate for someone with a credit score of 600 is above 9%. If you improve your credit score within the coming months or years, you should consider refinancing the loan. You will likely qualify for a better rate.
Converting APR to Monthly
For example, to determine the monthly rate on a $1,200 loan with one year of payments and a 10 percent APR, divide by 12, or 10 ÷ 12, to arrive at 0.0083 percent as the monthly rate.
...
Good Credit Card APRs by Credit Score.
| Credit Rating | Score Range | Good Credit Card APRs |
|---|---|---|
| Good | 700–749 | 19% |
| Fair/Limited | 640–699 | 21% |
| Bad | 300-639 | 18% |
If your credit score is in the 600 to 660 range, a car loan with an interest rate of 8% is good! However, if your score is higher, then an 8% interest rate is on the expensive side.
Rates for used cars were higher — 10.26 percent across credit scores. And the average rate for bad credit was a sky-high 20.62 percent. So, a “bad” annual percentage rate for a car would be on the upper end of these numbers. Legally, loans can't have an APR over 36 percent.
APR Examples
Suppose you lend me $20 for a year at 10% interest. At the end of the year I will owe you 20 + (20 x 10%) = 20 + 2 = $22. Now, 2/20 = 0.10, so the APR is 10%.
Is 12% a good APR for a credit card? Yes, an APR of 12% is a good credit card interest rate. However, you should still pay off your balance in full each month to avoid paying interest. If you are carrying a balance, consider a debt consolidation loan or a balance transfer offer.
- Paying your bills on time.
- Keeping your balances low.
- Paying off any debt in a timely manner.
- Diversifying your credit mix if possible.
- Keeping overall credit utilization low.
Fixed APRs generally do not change over the life of your loan. Variable APRs can fluctuate based on external factors like a change in the prime rate.
How can I lower my car loan interest rate?
- Be aware of your credit score. Be aware of what your credit score is and if there are any points that need to be corrected before you apply for a car loan.
- Clean up your score. ...
- Consider Refinance Loans. ...
- Enlist a cosigner. ...
- Consider in-house financing.
Is a 72-month car loan worth it? Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go.
A 15% APR on a car loan is astronomically high. At this level, most financial experts would agree that your money and time are better spent fixing your credit than adding more debt in the form of a car loan.
Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate. If you have poorer credit, you can still get a loan, but you will probably have to pay more for it or else find a co-signer.
