Law and rate changes
New federal and state rules that touch car loans, each with the date, what it means when you buy or refinance, and the source.
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Rates
Federal Reserve data: bank new-car loan rates dipped in the second quarter of 2026
The Federal Reserve's consumer credit release of October 7, 2026 shows commercial banks charged an average of 7.14% on 60-month new-car loans and 6.97% on 72-month loans in the second quarter of 2026, down from 7.53% for both in the first quarter. Finance companies averaged 6.3% on new cars, with a 67-month term and $41,705 financed.
What it means: The figures were collected before the September rate increase, so quotes you get this fall may run higher than these averages.
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State law
California's CARS Act takes effect
Senate Bill 766, the California Combating Auto Retail Scams (CARS) Act, signed by Governor Newsom in 2025, took effect on October 1, 2026. It bars dealers from misrepresenting a car's price, requires them to disclose the full offering price and optional add-ons, bans charging for add-ons that give the buyer no benefit, and gives used-car buyers a three-day window to return the car for a refund, minus a reasonable restocking fee.
What it means: If you buy a used car from a California dealer, ask how the three-day return works and get the full price in writing before you sign.
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Rates
Fed raises its target range to 3.75%–4.00%
On September 16, 2026, the Federal Open Market Committee raised the federal funds target range by a quarter point to 3.75%–4.00%, saying inflation remained elevated. It was the first change since December 2025.
What it means: Car loan rates may drift up, so a preapproval you already hold, with its expiration date, is worth more than usual.
On Lenditia
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Federal rule
IRS issues final rules for the car loan interest deduction
Final regulations published on September 8, 2026, and effective November 9, 2026, confirm the $10,000 yearly cap, the income phase-out and the rule that the car must be new and assembled in the United States; you can check the assembly plant in the VIN or on the window sticker. Interest on the part of a loan that covers rolled-over negative equity does not qualify, while items customarily financed with the purchase, such as service contracts, extended warranties, sales tax and vehicle-related fees, can be part of a qualifying loan. A refinance qualifies only up to the balance that was refinanced.
What it means: Before you claim the deduction, check that the car was assembled in the US and leave out interest tied to negative equity you rolled into the loan.
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State law
Indiana raises its doc fee enforcement threshold to $261.72
Effective July 1, 2026, Indiana's Auto Dealer Services Division will not take enforcement action on documentation fees of $261.72 or less. The figure is adjusted for inflation each year under IC 9-32-13-7.
What it means: Indiana buyers can use $261.72 as the yardstick when they see the doc fee line on a buyer's order.
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State law
Louisiana sets the 2026 maximum dealer documentary fee at $436
The Louisiana Motor Vehicle Commission announced on January 16, 2026 that the maximum documentary fee a dealer may charge in calendar year 2026 is $436. The cap comes from La. R.S. 6:969.18 and is adjusted for inflation using consumer price index data.
What it means: If you buy in Louisiana, a doc fee above $436 on a 2026 deal is over the state limit and worth questioning.
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Rates
Texas 2026 rate ceilings for dealer car contracts take effect
The Texas Office of Consumer Credit Commissioner's 2026 chart applies to motor vehicle installment contracts from January 1 to December 31, 2026. Models from 2024 and newer fall under the 18% alternate rate; 2022 and 2023 models may carry about 21.05% to 22.50% APR, and 2021 and older models about 24.68% to 26.75% APR, depending on the term.
What it means: On an older used car in Texas, a dealer contract can legally cost far more than a new-car loan, so compare it with a credit union offer.
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Rates
Fed's third rate cut of 2025 brings the target range to 3.50%–3.75%
The Federal Open Market Committee lowered the federal funds target range by a quarter point on December 10, 2025, to 3.50%–3.75%. It followed cuts of the same size in September and October 2025. Car loan rates do not move one-for-one with the federal funds rate, but lenders' funding costs follow it.
What it means: Lower short-term rates tend to ease what lenders charge over time, so a loan taken out in 2024 or early 2025 may be worth comparing with refinance offers.
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Federal rule
IRS lets lenders report 2025 car loan interest on statements or portals
Lenders that receive $600 or more of interest on a qualifying car loan must report it to the IRS. For interest paid in 2025, IRS Notice 2025-57 let them meet that duty by making the total available to the borrower by January 31, 2026, for example through an online account, a monthly statement or an annual statement.
What it means: For your 2025 return, you may not get a tax form for car loan interest; look for the total in your lender's portal or year-end statement.
On Lenditia
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Federal law
Federal tax credits for new and used EVs end after September 30, 2025
The July 2025 budget law ended the new clean vehicle credit and the used clean vehicle credit for vehicles acquired after September 30, 2025. The IRS treats a car as acquired once you sign a binding written contract and make a payment, which can be a nominal down payment or a trade-in; a buyer who met that test by September 30 could still claim the credit on taking delivery later.
What it means: An electric car bought today no longer comes with a federal purchase credit, so budget the full price when you size the loan.
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Federal rule
CFPB asks whether to supervise fewer nonbank auto lenders
Since 2015, the CFPB has supervised nonbank auto finance companies with at least 10,000 originations a year. In an advance notice published on August 8, 2025, the Bureau asked for comments on raising that threshold, with examples of 300,000, 550,000 and 1,050,000 annual originations that would cover only about 17, 11 or 5 companies. Comments closed on September 22, 2025; the notice did not change the rule by itself.
What it means: Your rights under federal lending law stay the same, but fewer finance companies may face regular CFPB exams if the threshold is raised.
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Federal law
New federal deduction for interest on loans for new US-assembled cars
The budget law signed on July 4, 2025 (Public Law 119-21) created a deduction for interest on a loan taken out after December 31, 2024 to buy a new vehicle for personal use that had its final assembly in the United States. It applies to tax years 2025 through 2028, is capped at $10,000 a year, and shrinks by $200 for each $1,000 of modified adjusted gross income above $100,000 ($200,000 on a joint return). You can take it whether or not you itemize; used cars and leases do not qualify.
What it means: If you finance a new US-assembled car, keep your loan statements: the interest may lower your federal tax bill for 2025 through 2028.