Debt · Guide

Car Loan: payoff guide

What makes car loan different from other debts, and the best approach to paying it down.

Typical rate: ~7.5% APR

Average new car loan rate was around 7.5-8% in 2024 for borrowers with good credit, higher for used cars. Car loans are secured (the lender can repossess), which keeps rates lower than credit cards. Unlike a home, a car depreciates — you can end up "underwater" (owing more than the car is worth) if you borrowed heavily on a depreciating vehicle.

Key tip: A car loan under 6% with a paid-off car at the end is relatively low priority vs credit card debt. Above 8%, pay it down faster.
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