Car Financing in 2025: What Buyers Need to Know
If you’re thinking about buying a used car in 2025, you’ve probably noticed that financing has changed quite a bit over the past few years. Interest rates, loan terms, and even how people apply for car loans are evolving. So, what does that mean for you as a buyer? Let’s break it down.
Interest Rates: Still High, But Stabilizing
After several interest rate hikes in 2023 and 2024, auto loan rates remain higher than they were a few years ago. As of early 2025, the average interest rate for a new car loan is around 6.6%, while used car loans are hovering around 11.7%. While these rates aren’t as low as pre-pandemic levels, they’ve started to stabilize.
The good news? If the Federal Reserve continues to lower interest rates later this year, we might see a gradual decrease in car loan rates. However, major drops aren’t expected anytime soon, so if you’re in the market for a car, waiting may not necessarily save you money.
Longer Loan Terms Are More Common
Because of higher interest rates and vehicle prices, many buyers are choosing longer loan terms—often 72 to 84 months (6-7 years). While this can lower your monthly payments, it also means you’ll pay more in interest over time. If you can afford it, a shorter loan term (like 48 or 60 months) can save you money in the long run.
Used Car Prices: Still High, But Deals Are Out There
Used car prices are still on the higher side, largely due to supply chain disruptions and inflation. However, some models are starting to become more affordable as the market adjusts. If you’re looking for the best deal, consider vehicles that are 3-5 years old—these often offer the best balance of price, reliability, and modern features.
How to Get the Best Auto Loan in 2025
If you’re planning to finance a car this year, here are a few tips to get the best deal:
- Shop Around for Rates – Don’t just go with the first offer you get. Check with banks, credit unions, and dealership financing to find the best rate.
- Improve Your Credit Score – A higher credit score can mean a lower interest rate, so paying off debts and making timely payments can help.
- Consider a Credit Union – Many credit unions are offering competitive auto loan rates and more flexible approval requirements, making them a solid option.
- Look for Incentives – Some dealerships and manufacturers are offering financing incentives, like 0% APR on certain models. These deals can help offset higher loan rates.
The Future of Car Financing
Technology is also changing how people apply for car loans. More lenders are using digital applications, which means you can get pre-approved online before even stepping into a dealership. Some are also using alternative data (like your utility or rent payments) to assess creditworthiness, which can help buyers with limited credit histories.
At Full On Pro Auto, we stay up-to-date on financing trends to help our customers get the best deals possible. If you’re in the market for a used car and need financing, stop by or reach out to see how we can help.
