Images by GettyImages; Illustration by Hunter Newton/Bankrate
Drivers have been met with headaches and high prices at the dealership and loan offices over the last year due to steep vehicle prices and high interest rates. While this increase is not predicted to disappear anytime soon, rates will likely drop slightly for those with healthy credit, predicts Bankrate Chief Financial Analyst Greg McBride, CFA.
The beginning of rate cuts and averting a recession will be the keys to lower auto loan rates in 2024 — at least for borrowers with strong credit profiles.
— Greg McBride, CFA | Bankrate Chief Financial Analyst
However, those with weak credit profiles should expect double-digit interest rates to persist in 2024.
- The highest auto loan rate in 2023 was 8.32 percent for a four-year used car loan in early December.
- The lowest auto loan rate in 2023 was 6.15 percent for a four-year used car loan in mid-January.
- Bankrate’s expert predicts five-year new car loan rates will reach an average of 7.0 percent and four-year used car loans, 7.5 percent by the end of 2024.
What happened to auto loan rates in 2023
In the past year, borrowers have faced the harsh reality of expensive monthly payments due to high interest rates. For many, these payments proved too expensive. Auto loan delinquency reached its highest rate in almost thirty years.
In early 2023, average rates for new and used vehicles were 6.58 percent and 11.70 percent, respectively, according to Experian. The third quarter brought similar rates, 7.03 percent for new and 11.35 percent for used.
High vehicle prices made for an even more challenging scenario for drivers in 2023. But though vehicle prices remained high during early 2023, they have dropped from record-high 2022 price tags.
The average used vehicle in December was $26,091, compared to $27,143 in December 2022, according to Cox Automotive. Vehicle inventory is up 2.4 percent month-over-month. These combined factors mean buyers should see more manageable prices in 2024. Similarly, new vehicle inventory is at its highest level since early spring 2021.
Strong credit borrowers may access more competitive rates
Although several factors drive interest rates, including moves made by the Federal Reserve, your credit has the most influence on the rate you’re offered. For example, prime borrowers in the third quarter secured an average rate of 6.88 percent for new cars compared to subprime borrowers with an average of 11.86 percent, according to Experian.
McBride shares that while the high-rate environment will persist, rates will ease for most borrowers in 2024. Increased competition between lenders may help drivers secure a good rate.
However, he warns, “don’t expect auto loan rates to fall enough to offset the increases we’ve seen over the past couple of years.”
The Fed will jumpstart the move with rate cuts, but in the absence of a sharp economic downturn, competition between lenders will rev up a bit, adding some fuel to the downward trend by year-end.
— Greg McBride, Bankrate Chief Financial Analyst
When asked what those with poor credit scores should expect in the coming year, McBride admits it will be a more challenging road ahead.
“Right now … for those who have weaker credit profiles, your credit is tight. Interest rates are really high, well into the double digits,” he explains, and “that’s not likely to change materially in 2024.”
But it’s not all doom and gloom for drivers still working to improve their credit score. The hope, McBride explains, “is that if the economy averts a recession, that there’s the potential that credit will tighten further or that it could even loosen up a little bit in the latter portion of the year.”
Next steps for consumers
The truth is, there is no perfect time to finance a new vehicle, and expensive costs can make it challenging for some to find a good deal. But McBride has simple advice for shoppers.
“The biggest step to move the needle is to improve your credit right before you’re in the market for an auto loan,” McBride says. “You could literally cut your rate in half just by improving your credit standing and putting yourself in a better position to qualify for more competitive rates.”
Follow these tips to keep your budget healthy and find the best deal on your car purchase.
- Stay current on credit card and loan payments — a history of timely payments boosts your credit score, qualifying you for lower interest rates.
- Shop with a few auto loan lenders to see which offers you the best deal.
- Take advantage of any seasonal deals dealerships offer.
- Be flexible. With less inventory, you may need to come prepared with backup car colors or models.
- Expand your search to several dealerships and research MSRPs before you head in for a test drive.
FAQs
Bankrate's expert predicts five-year new car loan rates will reach an average of 7.0 percent and four-year used car loans, 7.5 percent by the end of 2024.
What will auto loan rates be in 2024? ›
Auto loan rates for new and used vehicle purchases fell in the first quarter of 2024 to 6.73% and 11.91%, respectively, down slightly from the 15-year highs we saw at the end of 2023, according to Experian.
What are the interest rates predicted for 2024? ›
• Fannie Mae: Rates Will Decline to 6.4%
The August Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6.4% by year-end, a slight decline from 6.6% in the third quarter. All told, the mortgage giant predicts mortgage rates will average 6.7% in 2024 and 6% in 2025.
Will auto loan rates go down in 2025? ›
"I expect six rate cuts through the end of 2025, each a quarter percentage point, putting the federal funds rate just below 4%," said Mark Zandi, chief economist at Moody's. He expects auto loan rates to fall 75 percentage points through the end of 2025, putting the five-year car loan rate at close to 7%.
What is a good APR for a 72 month car loan? ›
Compare 72-Month Auto Loan Rates
| Lender | Starting APR | Award |
|---|
| 1. MyAutoloan | 6.99% for 72-month auto loans | Best Low-Rate Option |
| 2. Autopay | 5.69%* | Most Well-Rounded |
| 3. Consumers Credit Union | 5.99% for 72-month loans | Most Flexible Terms |
| 4. PenFed Credit Union | 4.74% for 72-month loans | Most Cohesive Process |
1 more rowAug 31, 2024
Mortgage Rate Projection for 2024
Mortgage rates are expected to go down throughout the rest of 2024, and they may continue dropping in 2025. Mortgage rates started ticking up from historic lows in the second half of 2021 and increased dramatically in 2022 and throughout most of 2023.
Will 2024 be a good year to buy a car? ›
Used car prices have been falling for months, and we expect prices to fall further in the second half of 2024. New car incentives will continue to pull buyers away from used car lots. If you're patient, you may save a few thousand dollars on a used car in just 2-4 month's time.
Will auto interest rates go down? ›
Auto loan rates for new cars were at their highest in the 1980s, when they hit 17.36% in November of 1981. Over the years, recessions and a global pandemic contributed to the volatility of loan rates. Economic experts don't expect the Fed to lower interest rates until 2024.
Will interest rates ever go back to 3? ›
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
How high could interest rates go in 2025? ›
There are no sources for officially projected interest rates in five years, but the Mortgage Bankers Association and Fannie Mae both predict rates on 30-year fixed-rate mortgages will drop to 5.9% by the end of 2025.
- LightStream - New car purchase loan. 4.5. NerdWallet rating. Est. APR. 7.74-15.69% Loan amount. $5,000-$100,000. ...
- Consumers Credit Union - New car purchase loan. 5.0. NerdWallet rating. Est. APR. 6.24-17.54% Loan amount. ...
- Alliant Credit Union – New car purchase loan. 4.0. NerdWallet rating. Est. APR. 5.50-23.25% Loan amount.
Average car loan interest rates by credit score
| Credit score | Average APR, new car | Average APR, used car |
|---|
| Superprime: 781-850. | 5.25%. | 7.13%. |
| Prime: 661-780. | 6.87%. | 9.36%. |
| Nonprime: 601-660. | 9.83%. | 13.92%. |
| Subprime: 501-600. | 13.18%. | 18.86%. |
2 more rowsSep 5, 2024
Strong credit borrowers may access more competitive rates
McBride shares that while the high-rate environment will persist, rates will ease for most borrowers in 2024. Increased competition between lenders may help drivers secure a good rate.
What is the average APR for a car in 2024? ›
According to Experian's State of the Automotive Finance Market report, the average auto loan interest rate for new cars in 2024's second quarter was 6.84 percent, and 12.01 percent for used cars. Generally, the lower your credit score, the higher your annual percentage rate (APR) will be.
What interest rate can I get with a 800 credit score car loan? ›
To understand what car loan interest rate you might qualify for based on your credit score, check out the average rates below for different credit tiers: Excellent (750 - 850): 2.96 percent for new, 3.68 percent for used. Good (700 - 749): 4.03 percent for new, 5.53 percent for used.
Is it smart to finance a car for 72 months? ›
Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.
Will repo rate decrease in 2024? ›
As per the announcement made by the Reserve Bank of India (RBI) on 07 June 2024, the current Repo Rate is 6.50%*, which keeps the Repo Rate unchanged as the Monetary Policy Committee (MPC) unanimously decided.
What is the outlook for the automotive industry in 2024? ›
U.S. Sales will increase 3% in 2024, with growth juiced by resurgent interest in PHEVs/ By 2030, ICE vehicles will only represent 35% of sales, upstaged by NEVs (new-energy vehicles, meaning battery electrics and plug-in hybrid electric vehicles), which will hit 41% share by that time.
What is a high interest rate for 2024? ›
Earn up to 8.1% FD interest rate: Some banks have revised the interest rates for their fixed deposit (FD) accounts for deposits less than Rs 3 crore, which will be in effect from September 2024. Let's examine the fixed deposit interest rates that apply to both regular customers and senior citizens.
What is the average car payment in 2024? ›
If you're a car owner, you've probably noticed that car payments are higher than they've been in years past. It's not just your imagination. In fact, as CNBC reported, the average car payment grew from $535 in May 2019 to $760 in May 2024 — a 40% increase.
