What is a Fair Interest Rate for a Used Car Loan?
The rate you receive when you take out a used car loan depends largely on where you live and by whom your loan is held. Rates vary from place to place, from bank to bank. In general, larger, nationwide banks tend to offer lower rates than smaller, independent ones. Interestingly, the same bank may also offer different rates at different branches (depending on location).
In 2009, the average interest rate for a used car loan was about 7.787%. The rate was based on $20,000 loans set at a fixed rate to good credit customers. This average is about on par for 2010; however, many banks and credit unions currently offer significantly lower rates. The Bank of America, for example, ranges from about 4.19 to 4.39%, depending on location and other factors.
Your credit score and history can be a factor in determining your used car loan interest rate. If your credit score is poor, banks may see your loan as a higher risk. This could very well make the rate they offer you go up.
When researching interest loan rates, it is also important to read the fine print. Some banks have hidden application or document preparation fees. The Bank of America, for example, requires a $200 document preparation fee for a used car loan. On the other hand, reading the fine print may pleasantly surprise you. Some banks offer interest rate discounts if the customer sets up auto-debit payments. If a patron has an established account with a particular bank, there are also other discounts available, in many cases.
Make sure that you ask lots of questions as you do your research. Rates are constantly changing, but it's possible to get a low-end rate if you shop around.
This site allows users to compare interest rates from different loan holders within a designated city and state. It will also calculate the average interest rate for that location. For example, if a customer lives in Lakewood, Colorado, he can search within the area and discover that the average rate for a used car loan in Lakewood is currently 7.444%. He can also find the low and high end rates available at different banks and credit unions.
Interest.com offers a great deal of information about the process of looking for and purchasing cars. There are articles available about how to effectively search, as well as a wide variety of useful tools for calculating interest rates, comparing prices, and working out monthly payments. The interest rate calculator is particularly useful.
This website offers helpful information about the process of looking for a good interest rate on used car loans, as well as information about current trends in the market. It contains charts of recent averages for cities around the US, which gives customers a good idea of what is considered "normal" in the market today.