The 20/3/8 rule, our guideline for using a car loan to buy a vehicle, requires you to put 20% down, pay the car off in 3 years or less, and keep your monthly car payment(s) to 8% or less of your gross income. Under our guidelines, there is no limit on the auto loan interest rate. You could, theoretically, take out a car loan with a 50% interest rate and still be following the 20/3/8 rule. If you are shopping around for a car, here’s how to shop around for the best interest rate and where you should (and should not) consider taking out a car loan.
The interest rate you pay on your auto loan is in large part determined by your credit score. To get access to the best interest rates, you typically need a score of around 780 or better. The table below shows what average auto loan interest rates were in the first quarter of 2026, by credit score, from Experian.
| Credit score | Average APR, new car | Average APR, used car |
|---|---|---|
| Superprime (781-850) | 4.55% | 6.30% |
| Prime (661-780) | 6.23% | 8.77% |
| Nonprime (601-660) | 9.67% | 14.03% |
| Subprime (501-600) | 13.44% | 19.42% |
| Deep subprime (300-500) | 16.01% | 21.77% |
When you are shopping around for auto loans, it should be possible to get a below average interest rate with some due diligence and shopping around. Keep in mind the table above shows average interest rates, and many consumers take out a loan with the first lender they get a quote from. If you are willing to put in the work, it should not be difficult to get a car loan with a below average interest rate. But where exactly can you find an auto loan with a great rate?Car dealers
1. Credit unions
Credit unions can be a great place for many banking needs, including auto loans. They are known for offering some of the lowest rates on the market and if you have a relationship with a credit union, they should be your first stop when you are shopping around for an auto loan. Even if you don’t have an existing relationship with a credit union, it’s still probably worth getting quotes from at least a couple institutions. Becoming a member of a credit union is usually as simple as depositing a nominal amount of money in a savings account that represents your “share” of the credit union (since they are owned by members).
2. Your local or online bank
If you have a longstanding relationship with a local or online bank, it is worth at least getting an auto loan quote to see what their rates are like. The rate may not be the most competitive, especially if you bank with a traditional brick-and-mortar establishment, but banks may offer competitive rates to get new customers in the door or to keep their most loyal customers happy.
3. Car dealerships
Car dealerships are last on this list because you should get rate quotes from credit unions and banks before talking to the dealership about financing options they offer. Many dealers are able to match or beat rates you get from outside sources, so make sure you bring preapproval letters of the offers you have from other financiers. Dealers often offer promotions that credit unions and banks do not, especially on new vehicles, such as 0% interest for a certain period of time. Even if a dealer isn’t able to give you a better interest rate, they may give you a better deal for financing with them (or one of their preferred lenders).
Additional tips
The key to getting a good interest rate on an auto loan is shopping around. If you are willing to put in a bit of work, you should easily be able to get a below average interest rate. If you already have a car loan with a rate that is less than ideal, consider refinancing. When you are shopping around for loans, try to do all of your rate shopping around the same time. Credit score models will group multiple inquiries into one if they are for the same type of credit (such as an auto loan) and all around the same time (generally all within 14 days or 45 days of each other, depending on the model).
Buying a car is a huge financial decision, and the rate you get on your auto loan can really impact how it impacts your finances. Take your time, shop around for the best rates, and don’t forget to follow the 20/3/8 rule.
