Auto loan APRs vary by 3–5 percentage points depending on where you borrow. Credit unions are typically the cheapest. Dealer financing is typically the most expensive. The difference on a normal car loan is thousands of dollars.
The rate ladder (typical 2026)
- Credit unions — 5.5–7% for good credit. Often the best rate.
- Online auto lenders — 6–8% (LightStream, Auto Approve).
- Traditional banks — 6.5–8.5%.
- Dealer financing (prime) — 7–9.5%.
- Dealer "special" financing (subprime) — 12–20%+. Aggressively marketed; genuinely expensive.
Why dealer rates tend to be high
Dealers aren't actually the lender on most loans. They're brokers — they shop your application to banks and financing companies, get a "buy rate", and mark it up before quoting you. The markup is the dealer's profit on the loan. Typical markup: 1–3 percentage points.
That's why walking in with pre-approval from a credit union forces the dealer to either beat that rate (cutting their markup) or let you use outside financing.
The pre-approval playbook
- 1. Apply for pre-approval from your credit union or online lender before shopping.
- 2. Get the pre-approval letter.
- 3. Shop the car. Negotiate the price separately from financing.
- 4. Tell the dealer you're pre-approved. Let them try to beat the rate.
- 5. Take whichever is better.
0% APR offers
Real deals, but usually restricted to specific models, specific trim levels, specific credit tiers (usually top-tier), and specific terms (often 36 months, rarely 60+). Also rarely combinable with cash-back or rebate offers. Run the math: is the rebate bigger than the interest you'd pay at market rates? Often yes.
Enter amount, APR, term. See monthly payment + total cost. Model different rates side-by-side.