Average interest rates on new-car loans are 14% lower than interest rates on average used-car loans, according to WalletHub’s first-quarter Auto Financing Report released today.
“Interest rates for new cars are at one of their lowest points in the past three years,” according to the report.
However, at the same time, the influx of off-lease volume is making the used market more attractive to prime-credit borrowers.
“Now is the time for people with excellent credit to buy used cars,” the report states. “The average interest rate for such buyers has fallen nearly 10% since the 1Q15.”
WalletHub reviewed auto finance offers from 158 lenders, including community and regional banks, national banks, credit unions, and car manufacturers.
Based on a 36-month term, WalletHub found that the average rate for a new car from a car manufacturer was 1.87%, compared with credit unions at 2.61%, national banks with 3.57%, regional banks at 4.01%, and community/small banks at 4.12%.
Additionally, buyers with “fair” credit (620 to 659 score) ended up spending five times more to finance a vehicle than someone with “excellent” credit (720-plus score) — equating to $6,267 in additional interest payments over the life of a $20,000, five-year loan, according to the report.