Question 1

What is a good interest rate for a car loan?

Accepted Answer

As of 2026, average auto loan rates are approximately 5-7% for new cars and 7-11% for used cars for borrowers with good credit (700+). Rates above 15% are considered high and typically apply to borrowers with poor credit. Credit unions often offer rates 1-2% lower than banks.

Question 2

How much should I put down on a car?

Accepted Answer

Financial advisors typically recommend a down payment of at least 20% for new cars and 10% for used cars. This reduces your monthly payment, lowers total interest paid, and helps avoid being "underwater" on the loan (owing more than the car is worth).

Question 3

Should I choose a longer or shorter loan term?

Accepted Answer

Shorter terms (36-48 months) mean higher monthly payments but significantly less total interest. Longer terms (72-84 months) lower monthly payments but cost more overall and increase the risk of negative equity as the car depreciates faster than you pay it off. Most financial experts recommend 48-60 months maximum.

Question 4

What is a trade-in and how does it affect my loan?

Accepted Answer

A trade-in is your current vehicle that the dealer accepts as partial payment toward your new car. The trade-in value is subtracted from the purchase price, reducing the amount you need to finance. Get an independent appraisal (Carmax, KBB) before visiting a dealer to ensure you get a fair trade-in value.

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