How does a lender decide what interest rate to offer me on an auto loan?

An auto lender will typically consider several main factors:

  • Your credit score and credit history
  • Your income and debts
  • The amount of the loan
  • The length of time you’ll be paying back the loan, called the “loan term” or “term of the loan"
  • The amount of your down payment as a percentage of the value of the vehicle
  • The type of vehicle and whether you are purchasing a new or used vehicle

Read more information on dealer-arranged financing.


Be sure to check your credit report for any errors before you shop for financing. Your interest rate can vary greatly based on your credit score and history. Don’t forget that you can apply for an auto loan or get preapproval from different lenders, such as banks, credit unions, or other lenders, before going to the dealership.

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