Used car loans typically carry higher APRs than new car loans — in 2026, the gap is roughly 3–5 percentage points across all credit tiers. Lenders see used cars as riskier collateral because they depreciate faster, are harder to value accurately, and have more mechanical uncertainty. New car loans benefit from manufacturer promotional rates (sometimes 0–2% APR), but the vehicle itself loses 15–25% of value in the first year. The total cost of ownership depends on the car's price, not just the rate.
New vs used car finance: key differences
| Factor | New car | Used car |
|---|---|---|
| Typical APR (prime borrower, 2026) | 5–8% | 8–13% |
| Manufacturer promotional rates | Available (0–2.9% APR common) | Rarely available |
| Max loan term | 84 months standard | Often capped at 60–72 months for older vehicles |
| LTV limits | Up to 115–130% | Typically 100–110%; lower for older cars |
| Age/mileage restrictions | None | Many lenders won't finance 10+ year / 100k+ mile vehicles |
| Depreciation risk | High first year (15–25%) | Lower relative depreciation |
| First-year value loss | Steep — can become underwater quickly | Softer — previous owner absorbed initial drop |
Why used car loans cost more
Lenders charge more for used car loans for two reasons: the collateral is less certain in value, and the risk of mechanical failure (and therefore loan abandonment) is higher. A new car has a published MSRP; a used car's value depends on condition, mileage, history, and market demand. This uncertainty leads lenders to apply a rate premium.
In Q4 2025, Experian data showed average APRs for prime borrowers at roughly 6–8% for new cars and 9–13% for used cars, a gap that widens further in subprime tiers.
Manufacturer promotional rates: the new car advantage
Automakers regularly offer subsidised finance rates through their captive finance companies (Toyota Financial, Ford Motor Credit, GM Financial etc.) — sometimes as low as 0% APR on selected models and terms. These promotional rates are funded by the manufacturer, effectively as a discount on the vehicle's cost, and are typically limited to specific credit tiers (often 720+ FICO) and term lengths (36–60 months).
If you qualify for 0% or 1.9% APR on a new car, that is almost certainly better than any used car finance deal — but compare it with the new car's price premium over an equivalent used model. A $5,000 lower price on a used car at 10% APR may still save you money overall.
Used car lender restrictions
- Vehicle age: many lenders will not finance cars older than 7–10 years at closing. Some cap it at 5 years for the best rates.
- Mileage limits: loans are commonly restricted to vehicles under 100,000 miles; some lenders cap at 75,000 miles.
- Model year + loan term: the car cannot be older than a certain age at the end of the loan term — so a 6-year-old car with a 60-month loan would be 11 years old at payoff, which some lenders won't accept.
- Loan minimum: many lenders won't write auto loans below $3,000–$5,000, which limits financing on very cheap used cars.
The depreciation argument for used cars
The biggest financial case for used cars is depreciation absorption. A new car that costs $40,000 may be worth $30,000 after 12 months — a $10,000 loss. A 3-year-old equivalent that cost the previous owner $40,000 now lists at $26,000, and will depreciate far more slowly from that point. If you finance $26,000 at 10% APR vs $40,000 at 3% APR, the lower loan amount on the used car often wins in total cost even with the rate disadvantage.
Certified Pre-Owned: a middle option
Manufacturer-certified pre-owned (CPO) programmes offer used cars that have passed a multi-point inspection and come with an extended warranty. Some manufacturers also offer promotional CPO finance rates — not as low as new-car promo rates, but meaningfully better than standard used car rates. CPO rates in the 4–6% range (for qualified buyers) are not uncommon in 2026. This can be the best value combination.
A 72-month loan at 5% APR on a $40,000 car costs significantly more in total interest than a 48-month loan at 10% APR on a $25,000 car. Always calculate total interest paid, not just monthly payment, before comparing financing across new and used options.
Frequently asked questions
Is it harder to get approved for a used car loan?
Can I get 0% APR on a used car?
Should I finance a used car or pay cash?
What is the oldest car I can get a loan for?
Does where I buy a used car affect financing?
Sources & further reading
Figures, prices and policy details were current at the last-updated date above. Automotive pricing, incentives and regulations change frequently — verify time-sensitive details with the linked primary sources. Read our editorial policy and fact-checking standards.
