Used Car Financing Rates: The Published Figure Is a Floor

Ask the internet what used-car financing rates are and you will be handed a number, or a small grid of numbers sorted by credit band, presented as though a rate were a posted price rather than a quotation. It is a quotation. It is produced at the moment you ask for it, out of inputs that belong partly to you, partly to the lender and partly to the car sitting on the forecourt. Two people with indistinguishable credit files can be quoted meaningfully different numbers on the same afternoon without anybody behaving oddly.

What can genuinely be looked up is what the market charges, and the Federal Reserve publishes it every month. That release is useful, and it is useful in a narrower way than almost anyone admits: it gives you the shape of the market and roughly where the bottom of it sits. It does not give you your rate. And — the part that almost nothing else written on this subject says plainly — the series everybody quotes does not describe used-car lending at all.

A rate is an output, not a price on a shelf

The mental model most shoppers arrive with is that there is a going rate, and that a credit score decides how far above or below it you land. The first half is wrong and the second half is only a sixth right.

A quotation is assembled from six inputs. Exactly one is about you, and it is not the input that has moved most over the past decade.

The lender’s cost of money. Before a bank lends you anything it has to obtain the money itself, and what that costs moves with the wider market and with nothing you do. It is the largest single reason a rate today differs from a rate a decade ago, and no borrower anywhere had a hand in it.

The term. Not a neutral choice of schedule but a priced characteristic, and priced in a direction most people find backwards. More on that below, because it is the least intuitive thing in the whole subject.

Loan-to-value. How much is being advanced against what the lender believes the car is worth. It is a genuine input to the rate rather than merely a determinant of the payment, and buyers routinely assume they have no say in it when it is in fact the input they control most directly.

The vehicle itself. Age, mileage, model and recorded history. The car is the security, so its characteristics price the loan the way a building prices a mortgage. Most rate discussion ignores this entirely.

Your credit file. Real, important, and the only one of the six that the popular treatment handles properly. Risk-based pricing has its own page here — how a credit file gets turned into a price — so this one will not go over it again.

Whoever is standing between you and the lender. On a loan arranged at a dealership there is a sixth number folded into the fifth, and it is not the lender’s.

Read the right-hand column downwards and the shape of the problem appears. Four of the six inputs are either invisible on the paperwork or visible only as a consequence. A borrower comparing quotes is comparing the sums, not the workings, which is why an offer that looks poor and an offer that is poor are so easily confused.

What the Federal Reserve actually publishes, and what it does not

This is the section that matters most, and it is the one that costs us something to write, because the honest version is less satisfying than the version that ranks.

The Federal Reserve Board gathers what commercial banks charge to finance a car and publishes the averages in its G.19 consumer credit release. Three of those series are quoted constantly: the average rate on 48-month loans, on 60-month loans and on 72-month loans. At the most recent reading, for May 2026, they stood at 7.47%, 7.14% and 6.97%.

Every one of those series is a new car loan rate. The commercial-bank release does not break out a used-car equivalent. There is no line in it that says what a used car is financed at, which means that every article confidently reporting an average used-car rate sourced to the Federal Reserve has either used a different dataset without saying so or quietly relabelled a new-car number.

This matters in one specific direction, and the direction is knowable even though the size of it is not. Used paper prices above new, for the four reasons set out later on this page. So the published figures function as a floor beneath a used-car quote and as a shape that used-car pricing broadly follows. They are not a benchmark you can hold your offer against and expect a match, and a used-car quote sitting above them is not by itself evidence of anything at all.

Two further limits are worth stating in the same breath, because they narrow the reading further.

The series covers commercial banks. Credit unions, manufacturer captive finance arms and independent finance companies all lend on cars, all price differently, and none of them is in these numbers. A credit-union quote sitting below the published average has not found a loophole, and a finance-company quote well above it has not necessarily overcharged you. They are different lenders in a different part of the same market.

And the series are averages. An average is the middle of a distribution, not the edge of one, which means roughly half of the lending it describes happened above the figure. Nobody is quoted the average. It exists to be a reference point, not a target.

Why the advertised rate falls as the term gets longer

Now the counter-intuitive part, and it is worth taking slowly because it is the single most useful thing in the release.

Read the three current figures in order of length. Forty-eight months is quoted at 7.47%, sixty months at 7.14%, seventy-two months at 6.97%. The rate goes down as the loan gets longer. Everything a person knows about borrowing suggests it should go the other way: more time means more risk, more risk means a higher price.

Then read the same three series as they stood ten years earlier, in February 2016: 4.17%, 4.11% and 4.08%. Same ordering, in a rate environment so different that not one of the three had reached five per cent. Whatever produces the pattern survived a wholesale change in the price of money, which tells you it is a property of how the product is built rather than a quirk of the current market.

Three things are going on, and none of them is a lender being kind.

These are three different products, not one product at three lengths. A lender does not write a six-year loan against any car or to any applicant. Longer terms require collateral with enough remaining life to still be worth something at the end, and they require a balance large enough to make the term make sense. So the population of loans inside the 72-month average is not the population inside the 48-month average. Comparing the two figures is not like reading a price list; it is like comparing the average rent of studio flats with the average rent of family houses and concluding that space is cheap.

A lower price on more money for longer is not a smaller sum. The rate is a charge per year against whatever is outstanding. Stretch the schedule and the balance falls more slowly, so a larger amount is outstanding across more years. A lender giving up a fraction of a percentage point in exchange for that is not conceding anything. The headline is smaller; what the headline is applied to is bigger, for longer.

The two numbers a shopper can see both improve, and the third is printed nowhere. Lengthen the term and the payment falls. Lengthen the term and, on the published evidence, the quoted rate falls too. The total amount of interest rises — always, whatever the rate does — and no document in the transaction puts that figure in front of you unless you go and calculate it. The two visible signals agree with each other and point the wrong way together.

That last point has been made on this site before, from the budgeting end of it, on the page about what a car should be allowed to cost you. Here it produces a different consequence, and the consequence is the practical reason this page exists.

The comparison most people make is not a like-for-like one

If the published rate depends on the term, then the phrase the average car loan rate is unfinished. It is only a number once you say over how long.

Which produces a specific and common error in reading a quote. Say you are offered financing over six years, and you go looking for something to measure it against. The figure that circulates most widely is the 48-month one, because that series is the oldest and the most quoted. It is also the highest of the three. Measure a 72-month offer against a 48-month average and you have chosen the most flattering possible reference point, entirely by accident, and an offer that is unremarkable will look competitive.

The error runs in the other direction too. Benchmark a four-year offer against the six-year published figure and a perfectly ordinary quote will look like a markup.

So the first rule of reading an offer against the published data is dull and load-bearing: match the term, then remember you are still comparing a used-car quote against a new-car average.

There is a second wrinkle in the release that almost nobody notices, and it is worth knowing before you lean on any of these numbers. The three series have very different lengths of history. The 48-month series runs back to February 1972 and has hundreds of observations behind it. The 60-month series starts in August 2006. The 72-month series only begins in August 2015, and has fewer than fifty readings in it — because the six-year car loan is a comparatively recent mainstream product rather than a fixture of the market.

The range each series has covered in its own lifetime tells the same story from another angle. The 48-month figure has been as high as 17.36% and as low as 4%. The 72-month series, over its much shorter life, has run between 4.08% and 8.76%. The 60-month one has spanned 4.05% to 8.4%. The longer terms have simply not existed long enough to have seen a genuinely expensive credit market, which is worth remembering before treating their history as a guide to what is normal.

The input that has nothing to do with you

Here is the fact that most reframes a bad-looking quote.

The 48-month average was 4.17% in February 2016 and 7.47% in May 2026. Nothing about American borrowers changed over that decade on anything like that scale. Credit files did not deteriorate; underwriting did not tighten by that much. What changed was the price of money itself, which is an input to your rate and an output of decisions taken a very long way from any dealership.

A useful control sits in the same release. The average rate on a 24-month unsecured personal loan at commercial banks was 10.03% ten years ago and is 11.86% now. Compare the two movements. The secured car rate travelled a long way; the unsecured personal rate barely moved by comparison.

That gap is informative rather than curious. A secured rate is mostly the cost of funds with a modest risk premium on top, because the lender holds a car it can take. An unsecured rate is mostly risk premium, and a risk premium does not respond to funding costs the way a thin margin over base does. So the car series tracks the market and the personal series largely does not, and the distance between the two at any moment is a rough measure of what the lien on your title is worth to a lender.

Two consequences follow for anybody reading a quote today. The first is that a rate substantially higher than the one your neighbour got in 2016 is not evidence that anybody has assessed you badly. The second is that the same borrower, at the same institution, in a different year, is a different price — which is the whole premise behind refinancing an existing car loan, and the reason a rate is worth revisiting rather than treating as permanent.

Why used paper prices above new

The published series bound your quote from below because used-car lending is priced above new-car lending. Four things drive it, and a single one of the four concerns the borrower at all.

The security is harder to value. A new car has a specification, an invoice and a single defensible price. A used car has a condition, a history, an odometer reading, an options list and a service record, and a lender’s valuation of it is an estimate with error bars on it. Uncertainty in the value of collateral is itself a cost, and it is priced.

There is less car left. A loan is secured against something with a finite life. On a used vehicle, more of that life has already been spent, so the security decays against the balance faster than it does on a new one — and on a long term, the schedule can outrun the point at which the car is reliably worth anything.

What a repossessed car realises is worse and less predictable. Lenders price the portfolio, not the person, and their experience of recovering money from defaulted used-car loans is worse than from new ones. That expectation goes into the rate for everybody, including borrowers who will never miss a payment.

Nobody is subsidising the rate. This one is invisible from the buyer’s side of the desk, and it probably explains more than the other three together. Manufacturers buy down finance rates on new cars as a marketing expense through their captive finance arms — the promotional rate is a discount funded by the seller, not a credit assessment of the buyer. There is no equivalent behind an ordinary used car. Certified pre-owned programmes are the partial exception, and for the same reason: those are the used cars a manufacturer still has a marketing interest in.

The valuation problem in the first of those is not abstract, and there is federal evidence for how unstable used-car values can be. The Bureau of Labor Statistics price index for used cars and trucks rose 45.24% in the twelve months to June 2021. It peaked at 213.683 in 2022, having bottomed at 121.061 in 2009. A lender writing six-year paper against that collateral is taking a view on a market with that in its record. The premium over a new-car rate is partly the price of that view.

Loan-to-value, and why a deposit moves the rate rather than only the payment

Most coverage treats a deposit as a way of reducing the monthly figure. It is that. It is also an input to the price of the loan itself, which is a different claim and a far less familiar one.

Loan-to-value is the amount financed set against what the lender believes the car is worth. It is assessed separately from your credit file, which is why two applicants with the same file can be quoted differently on different deposits, and why an applicant with an unremarkable file and a substantial deposit is sometimes the better risk of the two. Lenders publish tiers by loan-to-value the way they publish tiers by score, and the second set of tiers is rarely shown to consumers.

Three things about the ratio surprise people.

The denominator is the lender’s valuation, not your agreed price. Pay above what a valuation guide says the car is worth and the excess is not collateral. It raises the loan without raising the security, which raises the ratio and can move the rate — or produce the more frustrating outcome, where the lender simply will not advance the whole amount and you cover the difference in cash.

The numerator includes things that are not the car. Sales tax, title and registration, documentation charges, an extended warranty, a GAP product, and any negative balance carried across from a previous loan are all commonly financed. Every one of them increases the amount borrowed and none of them adds a penny of security. So the figure that really determines your loan-to-value is the total required to take the car away — establishing the out-the-door total is a job for before anybody starts talking about financing, not after.

The lever has grown more expensive to pull. The Federal Reserve’s average amount financed on used-car loans has risen from $16,670.42 ten years ago to $24,897.75 in the March 2026 reading. On new cars the average went from $28,140.06 to $42,503.54. Since a deposit works as a proportion of the total, holding the same loan-to-value now requires materially more cash than it did, and a deposit that would once have been comfortable no longer reaches the same tier. Nothing about the mechanism changed. The size of the thing it operates on did.

The practical point for reading a quote is that a rate is not offered against you in isolation. It is offered against you and a specific structure, and changing the structure changes the price. That is why an offer improves when a deposit is added, and it is why the improvement is sometimes larger than the arithmetic of a smaller balance would suggest.

The car is being underwritten too

Buyers think of the loan as underwritten on them. It is underwritten on them and on the collateral, and the collateral half is what kills applications late, once a price has already been shaken on.

Age and mileage limits are the ordinary version. Most lenders refuse outright past a stated model year or a stated mileage, and many price in bands well beneath those limits, so an older car with more miles on it can be a worse rate before anybody has opened your file. This is also why the same borrower is quoted differently on two cars at the same price.

The record attached to the specific vehicle is the version that catches people out. A salvage, rebuilt or flood brand will end most mainstream applications outright. An odometer figure at odds with what the car’s own history reports undermines the valuation the whole loan rests on. An unrepaired open safety recall is a defect the lender’s collateral carries. None of these is visible in a listing photograph, all of them are recorded against the VIN, and the lender will find them on its own within a day of the application.

Which makes this the cheapest piece of preparation available in the whole exercise. Before you spend weeks on your credit file for the sake of a better rate, spend a few minutes establishing that the car will support one — you can check what the title and mileage record actually say from the seventeen characters in the advertisement.

The rate you are shown has two authors

On a car bought at a dealership, the financing is usually arranged rather than direct. The finance office takes your details, sends them out to a panel of lenders, and receives quotes back. The rate a lender returns is its buy rate — the price at which it will buy the contract.

The Consumer Financial Protection Bureau describes what happens next without softening it. The rate put in front of you can sit above that buy rate, and the extra interest is what pays the dealership for having put the loan together. The arrangement is lawful, and it is disclosed in the loose sense that everyone in the industry knows about it. What it is not is separated out on your paperwork.

The consequence for benchmarking is sharper than the usual advice about negotiating it down. A dealer-arranged quote is not a measurement of you. It is a measurement of you plus a commercial decision somebody else made about how much margin this transaction would bear, and the two arrive fused into a single percentage. So when such a quote sits well above the published series, you genuinely cannot tell which of the two explains the distance. It might be your credit file. It might be the car. It might be participation. The number itself does not say, and asking the person quoting it is asking somebody with an interest in the answer.

Two questions cost nothing and are worth asking anyway. Whether you qualify for better terms — the Bureau suggests it explicitly. And whether other lenders responded, since a dealer typically approaches several and presents one of the offers that come back.

But the reliable move is not a question. It is to obtain a second number from somewhere that has no participation in it, which is the entire subject of the next section.

Direct lenders, credit unions, and what a second quote is for

The usual framing is that you should shop around because somebody will be cheaper. That is true and it is the less important half. The more important half is that a direct quote is a different kind of number from an arranged one, and it is the only instrument that will tell you what you actually cost to lend to.

A quote obtained straight from a bank, a credit union or an online lender contains no dealer margin, because there is no dealer in it. Whatever it says is that institution’s assessment of you, the car and the structure. Hold it against a dealer-arranged offer and the difference between them is informative in a way that neither number is on its own.

Credit unions are member-owned and not-for-profit, which changes how the pricing is set rather than guaranteeing it is lower. They are also, in practice, more used to lending on older vehicles and private-party purchases than large banks are, and readier to read an application rather than defer wholly to a model output. That counts for something when your circumstances are the sort a scoring model handles badly.

Banks vary widely and an existing relationship is worth about as much as the institution decides it is worth. Ask, and do not assume.

Online lenders compete on speed and convenience, and the quality of the servicing you inherit for the next several years varies more than the rate does — which is invisible at the point of comparison and quite visible in year three.

Captive finance arms deserve their own note because they distort the comparison in a way worth understanding rather than resenting. A promotional rate from a manufacturer’s finance company can sit below every published average without anything strange happening, because part of it is being paid for by the manufacturer as a sales incentive. Those offers are usually confined to new cars and to certified pre-owned stock, they usually carry conditions, and they are occasionally the best money available anywhere. A benchmark cannot tell you that. Only having the offer in front of you can.

At the bottom of the market the structure changes rather than merely the price, and a rate stops being comparable to anything in this release at all. Our page on buy-here-pay-here financing sets out what alters once the seller of the car is also the holder of the paper, and why the percentage is only a part of what that arrangement costs.

The only way to know your own number before you negotiate

Everything above is a way of reading a quote you have been given. There is exactly one way to know what your rate is before anybody at a dealership has an opinion about it, and that is to obtain an underwritten offer of your own first.

The mechanics belong on their own page and are not worth duplicating here: car loan pre-approval sets out what to apply for, what the offer is conditional on, and how long one lasts. What belongs on a page about rates is narrower than that.

An approval converts the rate from something you are told into something you hold. That changes the character of the whole negotiation, because a dealer-arranged offer stops being the only number in the room and becomes a competing bid against one that has no participation in it. If the dealer beats it, you have gained something real and you can see exactly how much. If it cannot, the comparison has done its job.

It also solves the benchmarking problem this page opened with. The published averages are a floor and a shape; your own approved rate, on your own car, on your term, is the only figure that is actually about you. Once it exists, the Federal Reserve series stops being a substitute for information and becomes what it should always have been — context.

Which number on the paperwork is the one to compare

A quote contains more than one percentage, and they are not interchangeable.

The interest rate on the note is the price charged against the balance. The annual percentage rate is broader. Regulation Z, which implements the Truth in Lending Act, builds it out of the finance charge — the dollar cost of the credit itself. A fee you incur only because you are borrowing belongs in that figure and lifts the APR above the note rate. Anything you would have paid in a cash purchase anyway, the price of the car being the obvious case, sits outside it and does not.

Two practical consequences. Compare APR against APR when you set two offers side by side, because two quotes at the same note rate and different fee structures are not the same loan. And when you hold an offer against the published averages, understand that you are comparing an average advertised finance rate to a disclosed APR, which is close enough for the purpose and is not identical.

Neither figure, incidentally, tells you anything about whether the car is sensibly priced. A rate is the price of the money. The price of the car is a separate negotiation and it is settled first.

Reading an offer against the published series

Pulling the whole page together, this is what a comparison can and cannot establish.

What that exercise gives you is a position, not a verdict. It tells you whether an offer is in the ordinary range for its term and structure, or whether it sits somewhere the published data does not explain. The second case is the one worth investigating, and the investigation is a second quote rather than an argument.

It is worth doing the collateral check first rather than last, because it is quick and it changes the other conversations. You can pull the history a lender’s valuation will reflect before you have committed to anything, and know what the underwriter is going to see.

What the published data cannot tell you

A page that leans this hard on a federal release owes you an account of where it stops.

It does not cover used cars. Said more than once on this page already, and worth saying again. The commercial-bank rate series are new-car series. Everything used sits above them by an amount the data does not specify.

It does not cover most lenders. Commercial banks only. The credit union down the road, the manufacturer’s finance arm and the independent finance company at the bottom of the market are all absent, and between them they write an enormous share of car loans.

It has no dispersion in it. An average tells you the middle and nothing about the width. The distance between the best and worst rate written in the same month at the same bank is not in these numbers, and that distance is the thing a borrower most wants to know.

It lags. These are monthly readings published after the fact. In a period when the price of money is moving, the most recent figure describes a market that has already moved on.

It says nothing about the car. A rate is the price of the money. A cheap loan on an overpriced vehicle is a worse transaction than an ordinary loan on a fairly priced one, and no rate comparison will ever surface that.

None of which makes the release less valuable. It makes it a different kind of valuable: a way of knowing whether a number is roughly where numbers are, rather than a way of knowing whether a number is right for you. That second question does not have a published answer, and the pages that pretend otherwise are selling something.

Common questions

What is the average interest rate on a used car loan?

The Federal Reserve does not publish one. Its commercial-bank series are new-car rates — 48 months at 7.47%, 60 at 7.14% and 72 at 6.97% in the May 2026 reading. Used-car lending is priced above new for reasons of collateral and recovery, so treat those figures as a floor and a shape rather than an average you should expect to be offered. Any page quoting one of them as a used-car average has relabelled a new-car series.

Why is the rate on a used car higher than on a new one?

Four reasons, only one of which is about the borrower. The collateral is harder to value, because condition and history vary in ways an invoice does not. There is less remaining life in it, so the security decays against the balance faster. Lenders recover less and less predictably from defaulted used-car loans, and that expectation is priced for everybody. And new-car rates are frequently subsidised by manufacturers through their captive finance arms as a sales incentive, which has no ordinary used-car equivalent.

Why is the advertised rate lower on a 72-month loan than a 48-month one?

Because they are different products written against different cars for different borrowers, not one product at three lengths. It is also not a concession: a lower annual charge applied to a balance that falls more slowly across two extra years is not a smaller sum of money to the lender. The published series showed the same ordering ten years earlier at 4.17%, 4.11% and 4.08%, in a completely different rate environment, which is how you can tell the pattern is structural. The quantity that gets worse as the term lengthens is total interest, and it is printed on nothing.

Does a bigger deposit lower the interest rate, or just the payment?

Both, potentially. Loan-to-value is assessed separately from your credit file and lenders tier their pricing on it, so reducing the amount advanced against the car’s value can move the rate itself rather than only the monthly figure. Note that the ratio is calculated against the lender’s valuation rather than your agreed price, and that tax, fees, add-on products and any rolled-over balance all raise the amount financed without adding any security.

Is the rate a dealer quotes me the rate the lender approved?

Often not. The lender returns a buy rate to the dealership, and the Consumer Financial Protection Bureau says the rate you are shown can carry extra interest above it, with that extra going to the dealership as payment for arranging the loan. Nothing on the contract separates the lender’s price from the dealer’s margin, which is why a quote alone cannot tell you whether a high number reflects your credit file or the arrangement. A direct quote from a bank or credit union is the only thing that separates them.

Should I compare the interest rate or the APR?

The APR, when you are setting two offers side by side. Under Regulation Z the finance charge is the dollar cost of the credit itself, so a fee you incur only because you are borrowing lifts the APR above the note rate, while anything you would have paid in a cash purchase — the price of the car among them — stays outside it. Two quotes at the same note rate with different fee structures are not the same loan, and only the APR shows it.

How can I tell whether a rate I have been quoted is reasonable?

You can establish where it sits, which is not the same as being told whether to take it. Match the published series to your term, remember it is a new-car figure and a bank-only figure, and treat it as a floor. Then obtain at least one quote from a lender with no involvement in the sale, because that is the only number that separates what you cost to lend to from what the arrangement costs. If a quote sits far above the published shape and a direct offer does not, the gap is in the arrangement rather than in you. What you do with that information is your decision, and this page is not in a position to make it.