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Is an 8% interest rate good for a car loan?
I have been shopping for a car loan here and there because my old car died. The best I can find is an 8% interest rate. Is this good?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
It depends! The interest rates available to you depend largely on your credit score.
However, if your score is higher, an 8% interest rate is expensive.
The average interest rate on a 60-month car loan as of September 2021 is 3.81%. So, an 8% interest rate is high by comparison.
To help calculate what you should be paying for your credit score, here are the averages for super-prime and subprime credit scores:
- Borrowers with super-prime credit (780+) can get a loan as low as 2.34%
- While deep subprime borrowers (500 or less) have an average interest rate of 14.59%
No matter what your interest rate, keep in mind that there will be a few other factors that affect your monthly payments, including:
- The total price of the vehicle you’re purchasing
- The length of the loan you select
- Whether or not you have a trade-in vehicle
- The size of your down payment
If you qualify for an interest rate that seems quite high, remember that you can refinance your loan (with the same bank or another bank) down the line, after raising your credit score and showing a positive history of on-time payments.
View full answer
- Gregory R.
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