What is a Good Interest Rate for Your Car Loan?
How does interest work on a car loan? What is a good interest rate for a car loan? Our finance team at Federico Kia is asked these questions every day! Your interest rate will depend almost entirely on your credit score, and we’ve made an overview of average APR by credit score. That way, our team can help you learn about rates before you apply for financing at Federico Kia near Alton!
New and Used Car APR
| Average New-Car Loan | Annual Percentage Rate | Average Used-Car Loan | Annual Percentage Rate |
| 781-850 | 3.17% | 781-850 | 3.8% |
| 661-780 | 4.03% | 661-780 | 5.48% |
| 601-660 | 6.79% | 601-660 | 10.1% |
| 501-600 | 10.98% | 501-600 | 16.27% |
| 300-500 | 13.76% | 300-500 | 19.32% |
What Is a Simple Interest Loan?
Most car loans are simple interest loans, as opposed to compound interest loans:
- With a simple interest car loan, interest is calculated only from the amount owed on the loan, and not the entire value. This can help Edwardsville drivers save money:
- amount owed on the loan principal x interest rate
- With compound interest loans, the interest charge is calculated from the amount of interest that has accumulated, as well as the amount owed on the loan.
- (amount owed on the loanprincipal + current interest owed) x interest rate
How Do You Get the Best Interest Rate?
In order to get the best interest rate, it’s important to plan early and plan ahead! Take these tips into account to ensure that you land a great interest rate:
- Check your credit history and credit score. The higher you credit score, the lower your interest rate.
- Get ready to negotiate with your provider. So what is a good car loan rate? Based on the chart above, it could be anywhere between 3.17% and 13.76% depending on your credit score.
- After looking at this chart, plan the rate you want and be prepared to negotiate if they offer you something higher than you expected.
- Be mindful of what the dealer is actually offering you for that rate. You don’t only want to focus on the payment and ignore the rest of the deal. Pay close attention to the details.
What is the Average Interest Rate on a Car Loan?
The average interest rate for a three-year loan is around 3% to 4.5%, but it may vary depending on your credit score as well as who is giving you the loan. In the end, the easiest way to compare your car loans and interest rates is to shop around near Godfrey, or get pre-approved and compare that way.
Is Car Loan Interest Deductible?
Every once in a while, one of our customers ask is, “is car loan interest deductible?” Unless your vehicle is a company car, or used strictly for business purposes, no, car loan interest is not deductible. If you have any questions, don’t hesitate to contact us today!
Get Started on the Loan Process at Federico Kia
Whether you’re wondering “is car loan interest deductible?” or “what is a good interest rate for a car loan?” our team is here to help! Apply for financing today, and our team will help you secure a competitive rate on a new Kia. We can also help you learn how to improve your credit score in an effort to acquire more favorable lending rates!