Auto loan rate forecast for 2026: Descending APRs unlikely to truly help car buyers beset by affordability challenges

With persistently high vehicle prices — plus rising auto insurance premiums, a cloud of tariffs and the expiration of EV subsidies — it might not seem like today’s car buyer has a whole lot to be happy about going into 2026. But auto loan interest rates offer a slight measure of good news.

Bankrate senior industry analyst Ted Rossman projects auto loan interest rates will continue the gradual descent that we saw throughout 2025. Even a slight reduction in the cost of a loan could deliver a sliver of relief to a car buyers market weighed down by affordability concerns, but don’t expect much more than that.

Bankrate’s auto loan 2026 forecast and industry insights 

The previous year in auto loan rates can be a useful point of comparison for the upcoming market. Rossman projects interest rates — both for new car purchases with five-year terms and used car purchases with four-year terms — will fall by about a third of a percentage point in 2026.

On top of that, Rossman predicts that the coming year’s lowest APR (annual percentage rate) will be a three-year low. These declines won’t suddenly solve the car market’s affordability crisis, Rossman warns.

“I would underscore, especially for car lending, a quarter point, half point, it doesn’t make that much of a difference,” he says. “Sure, lower rates are better than higher rates for borrowers, but it depends on the product. If you’re borrowing $500,000 to buy a home and your rate goes down by half a point, that makes more of a difference than in the car market.”

If the average 60-month new car loan rate falls from 7% to 6.40% in 2026, as Rossman predicts, that would only lower the monthly payment by $11 per month, from $792 to $781. Since existing car loans tend to have fixed rates, this difference would be felt primarily by people in the market for a new (or used) purchase or those who plan to refinance. 

For now, Bankrate, which has tracked auto loan rates since at least 1998, is baking three quarter-point rate cuts by the central bank into its 2026 forecast.

Potentially more wild swings in auto loan interest rates, which Rossman doesn’t anticipate, are still possible. Rossman says car loan rates closely follow the Fed’s policymaking — and President Trump, who can replace Fed chairman Jerome Powell this spring, has called for sudden and steep cuts.

“The president and probably the new Fed chair could be pushing for even quite a bit more than that,” says Rossman. “But they have to keep it in balance, right? Because there’s a chance that inflation could go higher because of tariffs. It’s already higher than many would like. Even [December’s] cut felt like a bit of a reluctant cut, or sort of a don’t-hold-your-breath for the next one kind of thing.”

What happened to auto loan interest rates in 2025?

Over the previous calendar year, car loan APRs gradually crept downward, despite a few fits and starts. In fact, the average rates for five-year new car loans and four-year used car loans fell 44 and 62 percentage points, respectively, from January to December 2025. These averages assume an auto loan applicant has a 700 FICO credit score.

Rossman expects a similar trajectory in 2026.

“I used 2025 and other recent years, but especially 2025, as a guide,” he says of his outlook. “In 2025, the average new, 60-month car loan started the year at about 7.50%. Now, it’s down to about seven. That pretty much matched what the Fed did until mid-December, and that cut hasn’t had the chance to fully bake into the market yet.”

If you’re concerned 2026 could bring as much economic uncertainty as 2025, it might not affect the movement of car loan rates. After all, many of the same questions facing the auto industry last year remain unanswered.

“It doesn’t seem like a lot of that is affecting rates all that much, just because a lot of those fears were there throughout this year — about what tariffs would do to the market, and we’ve seen auto loan delinquencies rise… And yet the spigot for lending is still open,” says Rossman. “Now, certainly it’s going to be better if you have a good credit score and a good income.”

What consumers need to know about auto loan interest rates in 2026

If you’re considering auto financing in 2026, set accurate expectations. Even if Bankrate’s mildly optimistic forecast comes to fruition, it’s unlikely to truly impact your budget.

Consider Rossman’s projections for low, average and high new car interest rates, specifically for a five-year, $42,332 loan — the average amount financed for new vehicle purchase in the third quarter of 2025, according to Experian.

Of course, improving your auto loan application — including your credit and debt-to-income ratio, among other factors — is the best way to swing your potential loan terms in the right direction. Unlike average auto loan rates and the economy at large, your personal finances are  more under your control.

Being a stronger applicant can save you significant interest in your prospective car loan. Consider the same loan size and term as above, but for APRs awarded by credit strength.

While used car loan rates are generally higher than new car loan rates and prices remain elevated, a used car loan could still be more affordable if the loan amount is smaller and the loan term is shorter than a new car loan.

So, shopping around, both for your type of car and for financing is critical. The other top recommendation from experts is to never walk into a dealership without financing secured. Before stepping foot on a lot, get preapproved for an auto loan with a reputable bank, credit union or online lender — then force the dealership to negotiate if it really wants your business.

“Line it up ahead of time if you’re going to buy from a dealer — don’t be taken by promises that they’re gonna give you a [temporary promotion] 0% or a really low rate,” says Rosemary Shahan, the president of Consumers for Auto Reliability and Safety. “Because even if the contract you sign has a good rate, you’re not going to end up with a good rate.”

• Methodology

  Our methodology for projecting where auto loan interest rates are headed in the year ahead combines expectations for the Fed’s benchmark interest rate and Treasury yields along with historical patterns in how lenders price new and existing credit products.

  To compile our forecast, we reviewed statements from Federal Reserve officials, documentation such as the Fed’s Summary of Economic Projections, investor expectations as measured by the CME FedWatch tool, Bankrate’s decades of interest rate information and other related resources.