Car Loan Rates Are Rising Again. The Bond Market Adds $225 to Your Loan. Your Credit Score Can Add $13,000
Last updated 10/09/2026 by
SuperMoney Team
Edited by
Andrew Latham
Summary:
Auto loan rates are starting to climb as Treasury yields hit 20-year highs. So far, the increase is small: about 0.2 percentage points on new-car loans, which adds roughly $225 in interest to a $40,000 loan. Your credit score, loan term, and where you get financing matter far more, often by thousands of dollars. Get preapproved before you visit a dealer, keep the term at 60 months or less, and shop at least three lenders within a two-week window.
If you’re planning to buy a car in the next few months, you’ve probably seen the headlines. Bond yields are surging, the Fed just raised rates, and auto loan rates are heading up.
All true. But the size of the increase so far is smaller than the headlines suggest, and the things that actually decide your rate are mostly in your hands. Let’s put real numbers on both.
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What’s happening with car loan rates
Most auto loans are priced off five- and 10-year Treasury yields. Lenders borrow money at roughly those rates, add a margin for risk and profit, and pass the result on to you. When Treasury yields climb, car loan rates follow.
And yields have climbed a lot. The 10-year Treasury pushed above 5.1% in late September, its highest level since 2006, and the five-year also topped 5%, according to CNBC. That followed the Federal Reserve’s quarter-point hike on September 16, which set the federal funds target range at 3.75% to 4.00%. Yields have kept climbing since. The 10-year closed between 5.22% and 5.31% every trading day from October 1 through October 8, according to the Treasury Department.
Cox Automotive chief economist Jeremy Robb said in a September 21 report that new-vehicle loan rates have risen about 20 basis points over the past two months, and used-car rates about 10 basis points. Industry economists expect more increases if yields stay this high.
Here’s the part that gets lost. Rates are still slightly lower than a year ago. Experian’s data shows the average new-car loan rate was 6.35% in the second quarter of 2026, down from 6.79% a year earlier. Used cars averaged about 11.2%, down from 11.57%.
How much does a 0.2% increase actually cost?
Less than you’d think. Take a $40,000 new-car loan over 60 months:
| APR | Monthly payment | Total interest |
|---|---|---|
| 6.35% | About $780 | $6,790 |
| 6.55% | About $784 | $7,015 |
That’s $4 a month. About $225 over five years.
Even a full one-point jump, to 7.35%, only raises the payment to about $799 and total interest to $7,920. That’s a real cost, roughly $1,130, but it isn’t a reason to panic-buy a car this weekend.
Compare that to the stuff you control.
The levers that matter more than the bond market
Your credit score
This is the big one. Experian’s second-quarter data shows super prime borrowers (scores of 781 or higher) paid an average of 4.41% on new-car loans. Deep subprime borrowers paid 16.11%.
On that same $40,000, five-year loan, that gap looks like this:
| Credit tier | APR | Monthly payment | Total interest |
|---|---|---|---|
| Super prime (781+) | 4.41% | About $744 | $4,645 |
| Deep subprime | 16.11% | About $975 | $18,504 |
That’s nearly $13,900 more in interest for the same car. The bond market’s recent move is a rounding error next to that.
Used cars show the same story, only worse. Super prime buyers averaged 6.29%, while deep subprime buyers averaged 21.62%. On a $25,000 used car over five years, that’s the difference between roughly $4,200 and $16,100 in interest.
If your purchase can wait 60 to 90 days, work on your score first. Pay credit card balances down below 30% of their limits (under 10% is better), don’t open new accounts, and check your reports for errors. Moving up even one tier can save you more than any rate cut would.
Your loan term
Longer loans lower the monthly payment, which is why dealers love to push them. But you pay for that stretch. Experian says the average new-car loan now runs about 5.8 years.
On $40,000 at 6.35%, going from 60 to 72 months drops the payment from $780 to $670. Sounds great. But total interest climbs from $6,790 to $8,207, and you spend more time owing more than the car is worth. That matters if the car is totaled or you need to sell early.
My rule of thumb: if you need 72 or 84 months to make the payment work, the car is too expensive for your budget right now. Look at a cheaper model or a certified used car instead.
Where you get the loan
Walking into a dealership without financing lined up is how people overpay. The dealer can mark up the rate the lender offers and keep the difference. The CFPB notes that the rate a dealer quotes you is negotiable.
Get preapproved from your bank, a credit union, and an online lender before you shop. Then let the dealer try to beat your best offer. Sometimes they will, especially with manufacturer promotions.
Don’t let fear of credit checks stop you. According to the CFPB, auto loan inquiries made within a 14- to 45-day window generally count as a single inquiry. To be safe, do all your rate shopping within 14 days.
Should you take 0% financing or the cash rebate?
With rates rising, manufacturer deals are worth a closer look. Automakers’ financing arms (called captive lenders) often offer promotional rates as low as 0% on select models. The catch is that you usually have to pick between the low rate and a cash rebate.
Run the numbers. Say you’re buying a $40,000 car and you’re offered either 0% for 60 months or a $3,000 rebate:
| Offer | Amount financed | Monthly payment | Total paid |
|---|---|---|---|
| 0% for 60 months | $40,000 | $667 | $40,000 |
| $3,000 rebate at 6.35% | $37,000 | $721 | About $43,280 |
The 0% deal wins by about $3,280 here. But if your credit union offers you something closer to 4%, or the rebate is larger, the math can flip. Always compare the total cost, not the monthly payment.
A simple game plan if you’re buying this fall
Here’s what I’d do, in order.
First, check your credit score and reports. If you’re close to a tier cutoff (like 661 or 781), spend a month or two paying down card balances before you apply.
Second, set your budget based on total cost, not a monthly payment. A common guideline is keeping all car costs (payment, insurance, gas, maintenance) under about 15% of take-home pay.
Third, get two or three preapprovals within the same two weeks. Bring the best one to the dealer.
Fourth, negotiate the price of the car before you talk financing. Mixing the two lets the dealer move numbers around until the payment looks fine while the total cost balloons.
Finally, keep the term at 60 months or less if you can. If rates keep rising, a shorter loan also limits how much the higher rate costs you over time.
Not sure where your credit stands or how a new payment would fit? The SuperMoney app lets you monitor your credit, track what you’re already spending each month, and see your debts side by side. That makes it much easier to pick a payment you can handle before a salesperson picks one for you.
Key takeaways
- New-car loan rates rose about 0.2 percentage points in two months, per Cox Automotive, adding roughly $225 of interest to a $40,000, five-year loan.
- Average rates are still slightly lower than last year: 6.35% for new cars and about 11.2% for used in Q2 2026, according to Experian.
- Super prime borrowers paid 4.41% on new cars while deep subprime borrowers paid 16.11%, a gap worth nearly $13,900 on a $40,000 loan.
- Stretching a $40,000 loan from 60 to 72 months adds about $1,400 in interest.
- Auto loan inquiries within a 14- to 45-day window typically count as one, so compare at least three lenders.
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