How to Get the Best Rate on a Used Car Loan
Getting a competitive rate on a used car loan can save you thousands of dollars over the life of your loan. With rates varying widely based on your credit score, the vehicle you're buying, and where y...
Getting a competitive rate on a used car loan can save you thousands of dollars over the life of your loan. With rates varying widely based on your credit score, the vehicle you're buying, and where you borrow from, understanding your options is crucial. The good news? You have more control over your final rate than you might think, and we'll show you exactly how to get the best deal.
Understanding Used Car Loan Rates in 2026
Used car loan rates are currently higher than new car loans because used vehicles are harder to value and represent a greater risk to lenders[1]. In February 2026, used car loan rates vary significantly depending on where you borrow and your creditworthiness.
Credit unions generally offer better rates than traditional banks. For example, a 36-month used car loan through a credit union averages around 5.70% APR, while the same loan through a bank averages 7.75% APR[1]. This means choosing the right lender can make a substantial difference in what you'll pay.
Some of the most competitive used car loan rates currently available include:
- Navy Federal Credit Union: 4.79% APR (12 to 72 months)[1]
- Digital Federal Credit Union: 4.99% APR (36 to 84 months)[1]
- U.S. Bank: 5.38% APR (12 months minimum)[1]
- MyAutoLoan: 6.24% APR (24 to 72 months)[1]
- LightStream: 6.49% APR for private-party loans (24 to 84 months)[1]
Key Factors That Affect Your Used Car Loan Rate
Your actual rate won't be determined by national averages—it's personalized based on several factors that lenders evaluate carefully.
Your Credit Score
Your credit score is one of the most important determinants of your interest rate. Borrowers with excellent credit qualify for the lowest rates, while those with fair or poor credit will pay significantly more. If your credit score is below 640, you may have limited options, though some lenders like Caribou specialize in fair credit refinancing[4].
Loan Term Length
The length of your loan affects your rate. Generally, shorter loan terms come with lower interest rates. For instance, Navy Federal offers rates as low as 4.79% for 12-36 month terms on used cars, but rates increase to 5.29% for 37-60 month terms[3].
Vehicle Age and Mileage
Newer used cars typically qualify for better rates than older vehicles with higher mileage. Lenders consider the vehicle's model year and exact mileage reading when determining your rate[3].
Type of Lender
Where you borrow matters. Credit unions tend to offer lower rates than banks, and some lenders specialize in specific borrower situations. For example, Digital Federal Credit Union offers the same competitive rates for both new and used cars and provides a 0.25% rate discount for fully electric vehicles[2].
How to Get the Best Rate on a Used Car Loan
Check Your Credit Before You Shop
Before applying for a loan, review your credit report and score. You're entitled to one free credit report annually from each of the three major credit bureaus through AnnualCreditReport.com. If your score is lower than you'd like, take time to improve it by paying down existing debt and making on-time payments. Even a modest improvement can result in meaningful savings.
Get Preapproved
Getting preapproved before shopping gives you several advantages. A preapproval shows you understand your likely rate range and keeps you from overpaying at the dealership. Navy Federal preapprovals are good for up to 90 days, giving you time to find the right vehicle[3]. Getting preapproved also protects your credit score—when you shop with a preapproval in hand, you won't need multiple hard inquiries from different dealers.
Shop Multiple Lenders
Don't settle for your bank's rate. Compare offers from credit unions, online lenders, and banks. Credit unions often have lower rates than traditional banks[1], and some offer special discounts. For example, if you're military or a family member of military personnel, Navy Federal offers exclusive rate discounts for active duty and retired members[3].
Consider Credit Union Membership
If you're not already a member, joining a credit union might be worth it. Many credit unions have easy membership requirements—Digital Federal Credit Union makes membership accessible, though you'll need to join to get their competitive 4.99% APR on used cars[2]. Some credit unions also offer benefits like the ability to borrow up to 30% more than the vehicle's value[2].
Explore Special Programs and Discounts
Some lenders offer rate discounts for specific situations. Digital Federal Credit Union offers a 0.25% rate discount for fully electric vehicles[2]. If you use autopay, some lenders like LightStream provide rate reductions. Always ask about available discounts when comparing offers.
Choose the Right Loan Term
While longer loan terms mean smaller monthly payments, they also mean paying more interest overall. A shorter term will save you money, even if the monthly payment is higher. Consider what you can comfortably afford, but aim for the shortest term possible to minimize total interest paid.
Consider Private-Party Purchases
If you're buying from a private seller rather than a dealer, you may have additional financing options. LightStream and Digital Federal Credit Union both specialize in private-party auto loans, and rates can be competitive—Digital Federal offers 4.99% APR for private-party purchases[1].
Comparing Your Options: Banks vs. Credit Unions
The difference between borrowing from a bank versus a credit union is significant. Here's how they compare for used car loans:
- 36-month term: Credit unions average 5.70% APR; banks average 7.75% APR[1]
- 48-month term: Credit unions average 5.82% APR; banks average 7.79% APR[1]
On a $30,000 used car loan with a 48-month term, this difference means you'd pay approximately $2,500 more in interest through a bank compared to a credit union. This makes credit unions worth exploring, especially if you qualify for membership.
Red Flags to Avoid
As you shop for a used car loan, watch out for these common pitfalls:
- Dealer markups: Dealers often mark up rates offered by lenders. Getting preapproved helps you avoid this[2].
- Processing fees: Some lenders charge processing fees (like Caribou's $499 fee) that can be passed to you by the lender[4].
- Multiple hard inquiries: Each application triggers a hard credit inquiry, which can temporarily lower your score. Limit applications to a short window (typically two weeks) so inquiries count as one for scoring purposes.
- Overly long terms: While a 72 or 84-month loan reduces your monthly payment, you'll pay significantly more interest.
FAQ: Used Car Loan Questions Answered
What's the difference between APR and interest rate?
Your interest rate is just the cost of borrowing the money. APR (Annual Percentage Rate) includes your interest rate plus any loan fees, giving you the true total cost of borrowing[4].
Can I refinance my used car loan to get a better rate?
Yes, if your credit has improved or interest rates have dropped, refinancing could save you money. Lenders like Caribou specialize in auto loan refinancing for borrowers with fair credit and positive vehicle equity[4].
How long is a preapproval good for?
Preapprovals typically last 90 days, giving you time to find the right vehicle without losing your rate quote[3].
Do I have to use dealer financing?
No. You can get financing from banks, credit unions, or online lenders before you shop, then use that financing at the dealership. This often results in better rates than dealer financing.
What's the lowest used car loan rate available?
In February 2026, the lowest advertised used car loan rates start at 4.79% APR through Navy Federal Credit Union[1], though your actual rate will depend on your credit and other factors.
Can I get a used car loan with bad credit?
Yes, though you'll pay higher rates. Lenders like CarMax specialize in bad credit used car loans[2], and refinancing platforms like Caribou work with borrowers who have credit scores as low as 640[4].
Your Next Steps
Getting the best rate on a used car loan doesn't require luck—it requires strategy. Start by checking your credit score and reviewing your credit report. Then, gather preapproval offers from at least three different lenders, including at least one credit union. Compare not just the interest rate, but the APR, loan terms, and any available discounts. Armed with a preapproval, you'll negotiate from a position of strength and avoid dealer markups.
Remember, the difference between a good rate and a great rate could save you thousands of dollars. Take the time to shop around, and you'll drive away with a better deal.
Sources & References
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