The average new-car loan in America now carries an interest rate above 9%, and used-car loans are hovering near 14%, according to the latest tracking from Edmunds and Bankrate.
On a $40,000 new car financed for 60 months, the difference between today's rate and the 4% loans of 2021 works out to roughly $5,500 in extra interest over the life of the loan.
Here's the part that stings: most buyers never see that number.
Dealers quote a monthly payment, not a total cost, and a longer term is the easiest way to shrink that payment.
The average new-car loan term is now pushing 69 months, and nearly 20% of new-car loans stretch to 84 months or longer.
Stretching to 84 months does lower the check you write each month.
It also means you'll likely owe more than the car is worth for the first two to three years.
If you need to sell or the car gets totaled, gap insurance becomes the difference between a clean exit and a rolled-over balance on your next loan.
The rate you're offered isn't one number.
It's a spread, and dealers can mark it up.
A dealer might get approved at 7.5% from a lender and present it to you at 9%.
That markup is legal in most states and is pure profit for the finance office.
Walking in with a preapproval from a credit union or your own bank gives you a ceiling and turns the dealer's offer into a comparison instead of a take-it-or-leave-it.
The gap between the best and worst tiers is enormous — borrowers with scores above 780 are seeing new-car rates in the 5% to 6% range, while those below 600 can face 15% or more.
Paying down a credit card balance or disputing an error on your report a month before you shop can move you an entire tier.
Watch for add-ons that quietly raise the financed amount.
Extended warranties, paint protection, and "dealer prep" fees all get folded into the loan, and you pay interest on every dollar of them.
Ask for the out-the-door price in writing before you discuss financing, and decline anything you didn't walk in wanting.
If you already have a loan, refinancing deserves a look.
Rates on used-car refinances have eased slightly from their peak, and credit unions are often the cheapest source.
Even dropping from 14% to 10% on a $25,000 balance saves real money — but only if you've paid down enough that you're not underwater on the car.
The honest takeaway: the rate matters more than the sticker price, and nobody at the dealership is paid to point that out.
Final Thoughts
Do the preapproval first, keep the term as short as you can actually afford, and treat every add-on as a separate purchase you can walk away from.