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As of 2025, average new car loan rates for borrowers with excellent credit (720+) are approximately 5-7% for 48-60 month terms. Buyers with good credit (680-720) typically see rates of 7-10%. Used car loans run 1-3 percentage points higher than new car rates for the same credit tier. Credit unions often offer rates 1-2 points below banks and dealer financing.

Financial advisors generally recommend putting down at least 20% on a new car and 10% on a used car. A larger down payment reduces your monthly payment, lowers the amount of interest you pay over the loan life, and helps you avoid being underwater (owing more than the car is worth) during the early years when depreciation is steepest.

Shorter terms (36-48 months) mean higher monthly payments but significantly less total interest and less time being underwater on the loan. Longer terms (60-72 months) lower the monthly payment but increase total cost and extend the period where you owe more than the car is worth. Most financial experts recommend keeping auto loans to 48 months or less for new vehicles.

Your trade-in value reduces the amount you need to finance. If your trade-in is worth $8,000 and you owe $5,000 on it, you have $3,000 in equity that can serve as a down payment. If you owe more than it is worth (negative equity), that shortfall is typically rolled into the new loan, increasing your starting balance and the total interest you will pay.