New vs. Used Car Loan Rates: What to Expect
Used rates are higher at every credit tier — and used cars are still usually cheaper. Both things are true.
The short answer
Used-car loans carry higher rates than new-car loans at every credit tier — Experian's Q1 2026 averages are 6.39% new versus 11.43% used. But a higher rate does not mean a more expensive car. On the national averages, financing the typical used car costs $15,469 less in total than the typical new one, because the price gap is far larger than the rate gap. The rate matters; the price matters more.
- Used rates are higher at every credit tier, and the gap widens as credit weakens.
- Compare total cost, not rates. A worse rate on a cheaper car usually still wins.
- On identical prices, the rate gap is expensive — about $5,394 over 72 months.
- Used cars go underwater less, because the steepest depreciation already happened.
- Certified pre-owned sometimes gets new-car-like rates, which is the best of both.
- New vehicles qualify for the federal loan-interest deduction; used ones don't.
How big the rate gap is
The rate difference is consistent and it is not small. These are Experian's published Q1 2026 averages by credit tier:
| Credit tier | New car APR | Used car APR | Gap |
|---|---|---|---|
| Super prime (781+) | 4.55% | 6.30% | +1.75 pts |
| Prime (661–780) | 6.23% | 8.77% | +2.54 pts |
| Near prime (601–660) | 9.67% | 14.03% | +4.36 pts |
| Subprime (501–600) | 13.44% | 19.42% | +5.98 pts |
| Deep subprime (300–500) | 16.01% | 21.77% | +5.76 pts |
The penalty for buying used more than triples as you move down the credit range — from 1.75 points at super prime to nearly 6 points at subprime. Weaker credit is punished twice: once on the base rate, and again on the used-car premium.
- Less predictable collateral. A used car's resale value depends on its individual history, not just its model.
- Higher default rates. Used-car borrowers skew toward weaker credit profiles as a group.
- Mechanical risk. A car that breaks down is a car whose owner may stop paying.
- No manufacturer subsidy. Captive finance arms discount new-car rates to move inventory. Nobody subsidises used.
Many lenders also refuse vehicles over 10 years old or above 100,000 miles entirely, which thins competition and keeps rates up.
Why the higher rate can still be cheaper
Here is where most comparisons go wrong. A higher rate sounds like a more expensive loan, so the natural conclusion is that new cars are cheaper to finance. That conclusion does not survive contact with the numbers.
Experian's Q1 2026 averages put the typical new-car loan at $43,925 and the typical used-car loan at $27,070. Financing both over 72 months at their respective average rates:
| New (avg) | Used (avg) | |
|---|---|---|
| Amount financed | $43,925 | $27,070 |
| Rate | 6.39% | 11.43% |
| Monthly payment | $736.08 | $521.23 |
| Total interest | $9,072.60 | $10,458.86 |
| Total paid | $52,997.60 | $37,528.86 |
The used buyer pays more interest ($10,459 vs $9,073) and still comes out $15,469 ahead, because they borrowed $16,855 less to begin with. Rate is a percentage; price is the thing the percentage applies to.
Put a specific new car and a specific used car side by side at their real rates and prices, and compare total cost rather than APR.
Compare total costWhat the rate gap costs on its own
None of that means the rate is harmless. To isolate its effect, hold the price constant at $30,000 over 72 months and change only the rate:
| Rate | Monthly payment | Total interest |
|---|---|---|
| 6.39% (new-car average) | $502.73 | $6,196.43 |
| 11.43% (used-car average) | $577.65 | $11,590.90 |
On an identical price, the used-car rate costs an extra $5,394 — a genuine and substantial penalty. The correct conclusion is not "rates don't matter." It is that the two questions are separate:
- Which car should I buy? Decided mostly by price and depreciation.
- What rate should I accept? Decided by shopping lenders, your credit tier, and your down payment.
Conflating them leads people to buy a more expensive new car in order to get a better rate — which is paying more to borrow more cheaply.
Manufacturer CPO programmes frequently offer subsidised financing closer to new-car rates on inspected, warrantied used vehicles. If you are buying used and the model has a CPO programme, it is worth pricing — you may capture most of the price advantage while avoiding most of the rate penalty.
Depreciation and the tax deduction
Two further differences change the picture beyond the loan itself.
Depreciation and negative equity
New vehicles lose roughly 23.9% of their value in the first year according to U.S. Bureau of Labor Statistics data, then around 11% in each of years two and three. A used buyer purchases after that first drop has already been absorbed by someone else.
That matters because it determines how long you spend underwater. A typical new-car loan is upside down until around month 29. A used car bought at three years old is depreciating far more slowly, so the balance catches up sooner. With 29.6% of trade-ins carrying negative equity in Q2 2026, this is not a marginal consideration — see rolling negative equity into a car loan.
The federal loan-interest deduction is new-only
For tax years 2025 through 2028, interest on a loan for a new, U.S.-assembled vehicle bought for personal use may be deductible up to $10,000 a year. Used vehicles do not qualify at all.
Before treating that as a reason to buy new, note the scale: year-one interest on the average new-car loan is about $2,627, and a deduction reduces taxable income rather than tax owed — so at a 22% marginal rate it is worth roughly $578. That does not close a $15,469 gap. The rules and phase-outs are covered in is car loan interest tax deductible.
See the month-by-month schedule for either option, including how quickly the balance falls against the car's value.
See the scheduleMethodology and sources
Payment and interest figures were computed from this site's auto loan amortization engine and independently verified in Python before publication, using Experian's published Q1 2026 average rates and average amounts financed for new and used vehicles.
The "average new car" and "average used car" comparison uses market-wide averages. A specific new and used car you are actually choosing between will have a different price gap, and the conclusion could differ. The comparison illustrates why total cost beats rate as a decision basis — it is not a recommendation to buy used.
- 1Average Car Loan Interest Rates by Credit Score — Experian, July 2026
- 2Annual depreciation rates by automobile age — U.S. Bureau of Labor Statistics, Monthly Labor Review
- 3Car Debt Grows Deeper as Loan Terms Stretch Wider (Q1 2026 insights) — Edmunds, April 2026
- 4Auto Loans — consumer tools and guidance — Consumer Financial Protection Bureau
Frequently asked questions
Founder and developer of We Are Calculator. No lead selling, no lender rankings, no affiliate-pulled recommendations. Every guide pairs primary sources (IRS, CFPB, Federal Reserve, CRA) with the free calculators you can run yourself.
Run the numbers yourself
Compare a specific new car and used car on total cost, not just rate.
Open calculatorPut two financing options side by side on total interest.
Open calculatorMonth-by-month schedule for either option.
Open calculatorAt used-car rates, extra payments are worth more — see how much.
Open calculatorKeep reading
Rolling Negative Equity Into a Car Loan: What It Really Costs
Nearly 3 in 10 trade-ins are underwater. See what rolling $6,884 of negative equity into a new car loan actually costs, and when your loan turns positive.
Read guide
How to Calculate Car Loan Interest (With Worked Examples)
Car loan interest is charged on your remaining balance, not the original amount. See the formula, a month-by-month worked example, and the estimate that overstates cost by 87%.
Read guide
Should You Refinance Your Car Loan?
Refinancing saves money only if you don't extend the term. See a worked example where a 4-point rate drop saves $2,129 — or just $136, depending on one choice.
Read guide
How to Pay Off Your Car Loan Early (And What You'll Save)
Adding $100 a month to a $30,000 car loan clears it 14 months early and saves $1,247. See every extra-payment tier compared, plus why biweekly saves less than advertised.
Read guide