Looking to finance a car in 2025? You’re not alone — and you’re probably noticing that interest rates aren’t as low as they used to be. But while rates are higher, smart shoppers can still find good deals.
This guide breaks down what rates look like in mid-2025, and more importantly, how to get the lowest rate possible, whether you’re buying new, used, or refinancing.
Auto Loan Interest Rates in Mid-2025
Due to inflation and cautious moves by the Federal Reserve, car loan interest rates remain elevated:
- New car loans: ~6.7% – 8.2% APR
- Used car loans: ~9.1% – 12.4% APR
- Excellent credit (750+): Often below 5%
- Fair or poor credit: 10%–15% or more
How to Get the Best Interest Rate
Here’s how to stack the odds in your favor when financing a car:
1. Know Your Credit Score First
Check your credit report before visiting the dealer. A score of 700 or above often qualifies for better rates. If you’re below that, consider improving your credit before applying.
2. Get Pre-Approved
Apply for pre-approval from your bank or credit union. This shows the dealer you’re serious and gives you a rate to compare against their offer.
3. Compare Lenders
Don’t settle for the first rate you’re offered. Shop around — compare:
- Dealership/manufacturer financing (e.g., Ford Credit, Toyota Financial)
- Traditional banks (e.g., Chase, Wells Fargo)
- Credit unions (e.g., Navy Federal, local CU)
- Online lenders (e.g., LightStream, Capital One Auto Navigator)
4. Make a Larger Down Payment
Putting more money down means borrowing less, which reduces risk for lenders — and can lower your rate.
5. Keep Loan Terms Short
Longer loans (72+ months) might offer lower monthly payments but come with higher interest costs. Stick to 36–60 months if possible.
6. Look for Manufacturer Incentives
Automakers sometimes offer promotional rates (like 0% or 1.9%) for certain models — especially near the end of a model year. These deals are usually reserved for buyers with strong credit.
🏦 Dealership vs. Bank: Where Should You Finance?
Dealership or Manufacturer Financing
- Pros: Convenience, special incentives, bundled deals
- Cons: May mark up interest rates unless you negotiate or qualify for a promo
External Banks or Credit Unions
- Pros: Often offer lower APRs, especially if you’re a member
- Cons: Slower approval process, but worth it for long-term savings
Final Thoughts
Financing a car in 2025 requires more planning than it used to — but if you go in prepared, you can still lock in a solid rate. Focus on your credit, compare offers, and don’t be afraid to negotiate. Whether you’re buying new or used, the best loan is the one that fits your budget and saves you interest over time.