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Auto loan interest rates are rising. For most of us, when buying a new or used car, agreeing on a price is only half the work (or if you have a car to sell/trade-in, a third of the work). Are you ready to go to battle for round two? That would be negotiating a fair auto loan interest rate.
Auto loan APRs are higher than they’ve been at any point in the past decade, and they’re headed even higher. How much do rising interest rates matter for today’s new and used car buyers? We crunched the numbers to find out.
The Average Car Loan Interest Rate Is the Highest Since 2009
What do you get when you combine interest rate hikes with the likelihood of an economic recession? It becomes a whole lot more expensive to borrow money. Whether you’re in the market for a new car or a new house, lenders seem to be increasing loan rates every other day in 2022.
According to new data from Edmunds, the average car loan interest rate (APR) on a new vehicle loan rose to 5.9% in September. That’s up 44% since December 2021. The last time auto loan rates were this high was right before the crash of 2009-2010.
What’s different this time around? Cars are 71% more expensive in 2022. Back in 2009, the average new car transaction price was $28,201. Today, it’s a bit over $48,000. Buyers are paying A LOT more interest in 2022, and monthly car payments are more akin to second mortgages.
In September 2022, the average amount that new car buyers financed was $41,347. Thinking about stretching that loan term as far out as possible? That adds up to a total of $7,849 in interest paid over 72 months. Ouch!
Used Car Loan Rates Rising Most
The average used car loan interest rate has shot up to 9.2%, adding thousands to the total cost of borrowing money to buy a car.
In September 2022, the average amount that used car buyers financed was $31,366. That adds up to a total of $9,566 in interest paid over a 72-month loan term.
What if you shop around and get pre-approved for a 7.0% APR instead of the average of 9.2%? Over 72 months, you’d SAVE a grand total of $2,429 in interest, all by simply shopping around and getting some more loan rate offers.
When ‘The Fed’ meets again in early November, they’re almost certain to announce another rate hike. Whether it amounts to 75 basis points or less is of little concern. What’s certain is that auto loan rates will continue to rise in November.
Based on our own analysis at CarEdge, we expect the average car loan interest rate to climb higher to between 6.5% (for new cars) and 10.5% (for used cars) in November.
Remember that these are expected averages, so there will be better (and worse) auto loan offers out there. Don’t settle for your first auto loan rate offer. Shop around!
How to Save Money on Auto Loan Interest, Even As Rates Rise
There are still ways to save big-time on auto loan interest. These are the biggest ways to keep more money in your pocket:
Shop around for the lowest interest rate. Pre-approval does impact your credit score, so it’s best to apply for all of your pre-approvals at the same time (or same week at least) right before you plan to buy the car.
Go for a shorter loan term! At today’s average new car loan interest rate of 5.9%, the difference between financing $35,000 with a 48-month loan and a 72-month loan is $2,267 in interest paid. That’s not pocket change!
Spend less, and/or put more down. It’s easier said than done, but consider borrowing less if you want to pay as little interest as possible. You could buy a less expensive car, put more money down for your down payment, or both.
Refinance your loan. Yes, even as interest rates are rising, if you get stuck with a bad loan, or improve your credit over time, you should consider refinancing your auto loan. Go to a local credit union so that you don’t get hit with fees from online websites.
Save Time and Money with Real Advice From Auto Experts
Have you joined the FREE CarEdge Community? Tens of thousands of car buyers, sellers, and owners are harnessing the power of community to make vehicle ownership what it should have always been: hassle-free with no gimmicks. Whether you’re searching for the best way to browse car listings online or looking for a community of auto enthusiasts, we’d love to have you.
Interest rates are rising, and inflation is at record highs, but deals can still be had when buying a new car. Every month, the team at CarEdge pores over the latest offers from every automaker. The result is a one-stop resource to share the very best new car deals with you.Â
Not finding what you’re looking for? We’ve included links to each automaker’s website. Check back frequently, as this living page will be updated regularly.
Check out these other CarEdge car buying resources:
Hyundai lease offers this month are good, but the amount due at signing has increased this month.
Hyundai Venue: $151 per month with $3,281 due Hyundai Elantra: $219 per month with $3,299 due Hyundai Kona: $209 per month with $3,999 due Hyundai Tucson: $279 per month with $3,999 due Hyundai Santa Fe: $269 per month with $3,999 due
Nissan Altima: $199 per month for 18 months with $2,309 due Nissan Leaf: $269 per month for 36 months with $5,259 due Nissan Rogue (AWD): $299 per month for 36 months with $3,459 due Nissan Murano (FWD): $299/month for 24 months with $2,099 due
With interest rates rising and inflation putting pressure on automakers and their dealer networks, the only thing that could bring better new car deals would be plummeting demand. We’ve seen signs of weakening demand and higher new car inventory, but nothing considered drastic. Expect auto loan interest rates to climb in 2023. The best car deals in February won’t last.
Buying a Car Soon? Check Out These Other Resources
States eligibile for below invoice pricing and 100% free delivery:
Alabama, Arkansas, Texas, Oklahoma, Florida, Georgia, Kentucky, Louisiana, Maryland, Delaware, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.
What if I don’t live in these states? If you're outside these areas, don't worry! We're committed to making sure everyone can enjoy our deals. Although the delivery fee will not be waived, you can still purchase from CarEdge and either pay for shipping or coordinate pickup at a participating dealer.
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