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. But a higher rate does not mean a more expensive car. In our example — a $44,000 new car at 7.14% and a $27,000 used car at 11%, both over 72 months — the used car costs $17,222 less in total, 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 $4,142 on $30,000 over 72 months in our example.
- 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. Experian's quarterly auto-finance data, which publishes average new- and used-car APRs for each credit tier every quarter, shows used-car rates above new-car rates at every tier. Check the latest quarter there for current figures.
The used-car premium also grows as you move down the credit range. 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.
Take an example new car financed at $44,000 and an example used car financed at $27,000. The new-car loan uses 7.14%, the Federal Reserve's commercial-bank average for a 60-month new-car loan in the second quarter of 2026; the used-car loan uses an example rate of 11%. Both over 72 months:
| New (example) | Used (example) | |
|---|---|---|
| Amount financed | $44,000 | $27,000 |
| Rate | 7.14% | 11% |
| Monthly payment | $753.12 | $513.92 |
| Total interest | $10,224.48 | $10,002.25 |
| Total paid | $54,224.48 | $37,002.25 |
Despite the higher rate, the used buyer pays about the same interest ($10,002 vs $10,224) and comes out $17,222 ahead, because they borrowed $17,000 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 |
|---|---|---|
| 7.14% (Fed G.19 new-car average) | $513.49 | $6,971.23 |
| 11% (example used-car rate) | $571.02 | $11,113.61 |
On an identical price, the higher example rate costs an extra $4,142 — 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 value fastest in their first year, and depreciation slows after that. 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 can stay upside down for years. A used car bought at a few years old is depreciating more slowly, so the balance catches up sooner. With many trade-ins carrying negative equity, 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 example $44,000 new-car loan at 7.14% is about $2,945, and a deduction reduces taxable income rather than tax owed — so at a 22% marginal rate it is worth roughly $648. That does not close a $17,222 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 example prices, the Federal Reserve G.19 commercial-bank 60-month new-car average of 7.14% (second quarter of 2026) and an example used-car rate of 11%.
The new and used examples are illustrations, not market 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, September 2026
- 2Consumer Credit — G.19 (commercial bank 60-month new-car loan rate, Q2 2026) — Federal Reserve, September 8, 2026 release
- 3Auto Loans — consumer tools and guidance — Consumer Financial Protection Bureau
Frequently asked questions
Written by
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
All calculatorsCompare 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.
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