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As of 2026, US auto loan rates typically range from about 5.5% for excellent credit (760+) on new cars, to 14%+ for subprime credit on used cars. New car loans are usually 1–2 percentage points lower than used car loans. If you're being offered above 10% with strong credit, walk away and shop another lender — the rate is negotiable.

A common rule is that your total transportation costs (loan, insurance, gas, maintenance) should stay below 15% of your take-home pay. Some financial advisors use the 20/4/10 rule: 20% down, 4-year max loan, total transportation under 10% of income. If you're stretching to make payments work, you're buying too much car.

Get pre-approved through your bank or credit union first, then let the dealer try to beat it. Dealers can sometimes beat bank rates through manufacturer financing incentives, but they also mark up rates to earn a commission. Coming in with a pre-approval forces them to compete and gives you a walk-away alternative.

Long-term auto loans (72-84 months) keep monthly payments low but cost dramatically more in interest, and you'll likely be underwater (owing more than the car is worth) for the first 3-5 years. If you need 72+ months to afford the car, you can't really afford it. The 4-year rule exists for a reason.

Significantly. The gap between excellent credit (760+) and fair credit (620) can be 3-5 percentage points on the same loan. On a $35,000 loan over 60 months, that's $4,000-$6,000 in extra interest. Check your credit score before shopping — even raising it 20 points before applying can save thousands.

Yes, in nearly all US states. Federal law prohibits most prepayment penalties on consumer auto loans. Making bi-weekly payments (half the monthly amount every two weeks) results in one extra payment per year and can shave months off the loan. Always confirm with your lender that extra payments are applied to principal.

Gap insurance covers the difference between what you owe on the loan and the car's market value if it's totaled or stolen. New cars depreciate 20-30% in the first year, so if you put less than 20% down and finance long-term, you'll likely be "upside down" for years. Gap insurance is worth it when financing 80%+ of the car's value.

Buying makes more sense if you keep cars 7+ years, drive over 12,000 miles/year, or want to build equity. Leasing makes sense if you always want a new car every 2-3 years, drive less than 12,000 miles/year, and use the car for business (tax write-off). Over a lifetime, buying and holding is almost always cheaper than perpetual leasing.

The traditional recommendation is 20% on new cars and 10% on used cars. This helps you avoid being underwater on the loan and gives you a buffer if you need to sell or trade later. With dealer incentives sometimes pushing 0% APR or low rates, putting less down can occasionally make financial sense — but only if your credit is excellent.

MSRP is the manufacturer's suggested retail price — the sticker price. Invoice is what the dealer paid the manufacturer (usually 5-15% below MSRP). Out-the-door (OTD) is the total amount you'll write a check for, including all taxes, fees, and add-ons. Always negotiate based on OTD, not monthly payment — that's how dealers hide markups.