Pull up a chair, because this is the number I've been waiting two and a half years to type: 6.93%. That's the average interest rate on a 60-month new car loan as of this week, according to Bankrate's weekly survey. The last time we saw rates this low? June 2023.
If you've been on the fence about buying a car — new or used — the math just shifted in your favor. And not by a little. A one percentage point drop on a $35,000 loan over 60 months saves you about $1,100 in total interest. That's a decent used car tire budget, plus a few tanks of gas.
Why the sudden drop?
The Federal Reserve has been gradually cutting rates since late 2025, and the market is finally catching up. The fed funds rate sits at 4.25% as of March, down from a peak of 5.5%. Auto lenders — who typically price loans based on the Treasury yield and their own cost of funds — are passing those savings along. Competition is heating up too. Banks are fighting hard for your business, which means promotional rates and tighter spreads.
LendingTree is already showing new car loans starting at 4.19% for well-qualified buyers, with used car loans as low as 4.79%. Credit unions are even cheaper: some are offering rates in the mid-3% range for members. Yes, you read that right — three-point-something percent on a car loan.
What this means for your wallet
Let's run the numbers on a realistic scenario. Say you're buying a 2026 Honda Civic at $26,000 with a $5,000 down payment, leaving $21,000 to finance. At 7.93% (last year's average), your monthly payment would be around $420 and you'd pay $2,170 in interest over five years. At 6.93%? That's $405 a month and $1,790 in interest — a savings of $380 in your pocket.
Now stretch that to a more expensive ride — say a $45,000 SUV with $10,000 down. The difference between 7.93% and 6.93% on a $35,000 loan is roughly $65 per month and $3,900 in total interest over the life of the loan. That's a whole set of tires, or 18 months of car insurance.
When to lock in your rate
Here's my take: if you have a credit score of 720 or above, now is the time to act. Rates are good and getting better, but they're not going to stay this low forever. The economy is showing signs of acceleration, and the Fed has signaled it's done cutting for the year — maybe even starting to hike if inflation ticks back up.
My advice? Get pre-approved before you walk onto a dealership lot. Pre-approval gives you negotiating power and locks in your rate for 30-60 days, depending on the lender. It also keeps you out of the F&I office's rate markup games, where dealers sometimes add 2-3 percentage points to the base rate as a "convenience fee." With rates this good, you don't need their help.
Watch out for the used car premium
One thing to note: the rate improvement is better for new cars than used. The average used car loan rate is still hovering around 7.5-8%, partly because lenders view older collateral as riskier. If you're considering a used car, factor that into your decision. Sometimes a slightly higher rate on a $18,000 used car costs you less than a lower rate on a $30,000 new one — but not always.
Run the exact numbers for your situation with our Auto Loan Calculator. Plug in your loan amount, term, and rate to see your monthly payment and total interest. Then compare a few scenarios — 60 vs. 72 months, new vs. used, different rates — to find what works for your budget.
The bottom line
We're in a sweet spot right now. Rates are the lowest they've been in almost three years, inventory is normalizing on dealer lots, and there's legitimate competition among lenders. If you've been postponing a car purchase because financing felt brutal, this is your sign. The window is open — don't wait until it closes.
But do your homework first. Get pre-approved, know your credit score, and run the numbers before you test drive. A $5 difference in your monthly payment adds up to real money over five years — and right now, that difference is working in your favor.