New Car Loans: What They Cost and How to Compare Offers

What a new car loan costs in 2026

Experian's market data for April to June 2026 put the average new-car loan at $43,610, repaid over 69.5 months at $765 a month. The average rate was 6.35%, well under the 11.19% paid on used cars. The spread between borrowers is wider than the spread between car types: someone with excellent credit paid less than a third of the rate charged at the bottom of the scale.

The Federal Reserve tracks a different slice of the market. Its consumer credit release of October 7, 2026 shows commercial banks charged 7.14% on 60-month new-car loans and 6.97% on 72-month loans in the second quarter. Finance companies averaged 6.3% on $41,705 over 67 months. Those figures were gathered before the Fed raised its target range on September 16, 2026, so quotes this fall may run a little higher.

Who lends for new cars

Whichever lender you pick, the loan is secured by the car. The lender holds a lien on the title until you pay in full, and your contract will likely require you to keep the car insured for as long as you owe money.

What lenders look at

• Credit history: your score sets your tier, and the tier sets most of the price.
• Income and other debts: lenders compare the new payment and your existing debts with what you earn.
• Loan-to-value: a down payment or trade-in equity means the loan is smaller than the car's value, which lowers the lender's risk.
• Term: a longer loan keeps the lender's money at risk for more years, and some lenders price that in. Ask for a quote at each term you are considering.

Taxes, title fees, the dealer's documentation fee and any add-ons are usually rolled into the loan, so the amount financed is often larger than the price on the window sticker. Our guide to the out-the-door price shows how to add those lines up.

Promotional rates versus cash rebates

Carmakers sometimes advertise very low rates, even 0%, on selected models. These offers come from the carmaker's finance company and can be limited to certain models, terms and credit tiers; the fine print of the ad says which. On some models the carmaker also offers a cash rebate, and you may have to choose one or the other. The math decides which is worth more.

In this example the promotional rate wins by about $1,100. With a bigger rebate or a lower outside rate, the answer flips. Run both versions in the car payment calculator before you sign, and confirm that the price of the car is the same in both deals.

How the term changes the total

New cars are often financed for six years or longer. A longer term lowers the payment, but you pay interest for more months, and the car loses value faster than you pay down the balance in the early years. Owing more than the car is worth makes it hard to sell or trade early.

Stretching from five to seven years saves about $189 a month here and costs about $2,760 more in interest. The loan term comparison runs the same test on your numbers, and our page on choosing a loan term explains the trade-off.

The federal deduction for car loan interest

A 2025 federal law (Public Law 119-21) lets you deduct interest on a loan taken out after December 31, 2024 to buy a new vehicle for personal use whose final assembly took place in the United States. It covers tax years 2025 through 2028 and you can claim it whether or not you itemize.

• Cap: up to $10,000 of interest a year.
• Income limit: the cap shrinks by $200 for every $1,000 of modified adjusted gross income above $100,000, or $200,000 on a joint return.
• What does not count: used cars, leases, and the interest on any part of the loan that paid off negative equity from a trade-in.
• Refinancing: a refinance loan qualifies only up to the balance that was refinanced.
• Assembly: the plant location appears on the window sticker and can be decoded from the VIN.

Steps to finance a new car

1. 1 Check your credit before you shop; Funditia explains how credit scores work.
2. 2 Get a direct quote from a bank or credit union so you know your APR and the most you can borrow. The CFPB says auto loan inquiries within a 14- to 45-day window, depending on the scoring model, count as one.
3. 3 Settle the price first, then talk about financing, so a rate concession is not paid for with a higher price.
4. 4 Ask the dealer to beat your rate on the same term, and compare the APR, finance charge and total of payments on the contract.
5. 5 Check the extras before signing; GAP and service contracts are optional, as our page on add-ons explains.

Questions people ask