By Ben LuthiWhat’s the Highest Legal Interest Rate for Auto Loans?
The highest interest rate on a car loan can vary by state, and in many cases, auto lenders are exempt from rate limits that apply to other consumer loans. With no federal maximum, rates can range from the single digits to upwards of 20%; some bad-credit lenders go much higher.
If you're planning to buy a car and don't have stellar credit, understanding the applicable laws in your state can help you avoid being overcharged.
Car Loan Interest Rates Vary by Credit Score
Available interest rates for both new and used cars can vary depending on your credit score. Borrowers with near-perfect credit, for instance, can easily secure a single-digit interest rate. However, rates can climb into the teens and 20% range for borrowers with fair or poor credit.
Here's a look at the average interest rate by credit score, according to Experian's State of the Auto Finance Market report from the fourth quarter (Q4) of 2024:
| Credit Score Range | New Car APR | Used Car APR |
|---|---|---|
| Super prime (781 or above) | 4.77% | 7.67% |
| Prime (661-780) | 6.40% | 9.95% |
| Near prime (601-660) | 9.59% | 14.46% |
| Subprime (501-600) | 13.08% | 19.38% |
| Deep subprime (300-500) | 15.75% | 21.81% |
Source: Experian data as of Q4 2024; VantageScore® 4.0 used
Maximum Interest Rate for Car Loans by State
Interest rate maximums can vary significantly from state to state, and in many cases, loopholes in state laws can allow auto lenders to charge more than the standard maximum for consumer loans.
What's more, federal law allows national banks to charge up to the maximum interest rate in their home state, regardless of where the borrower lives. That said, here are the maximum interest rates for each state.
Maximum Auto Loan Interest Rates by State
| State | Maximum Interest Rate | Resources |
|---|---|---|
| Alabama | 8% on loans under $2,000; no maximum on larger loans but must not be "unconscionably" high | More info |
| Alaska | 10.5% with no contract; 10% or 5% above legal rate set by Federal Reserve with contract; 15% for credit unions; no cap for loans over $25,000 | More info |
| Arizona | No maximum | More info |
| Arkansas | 17%; does not apply to federally insured deposit institutions | More info |
| California | 10% for consumer loans; exempts most auto lenders | More info |
| Colorado | 21% | More info |
| Connecticut | 16% for new cars; 18% for used cars | More info |
| Delaware | 5% over the Federal Reserve discount rate | More info |
| District of Columbia | 21% | More info |
| Florida | 30% for the first $3,000; 24% for the amounts ranging from $3,000 to $4,000; 18% above that | More info |
| Georgia | 16% for loans $3,000 or less; no maximum on larger loans | More info |
| Hawaii | 24% | More info |
| Idaho | No maximum | More info |
| Illinois | 36% | More info |
| Indiana | 25% | More info |
| Iowa | 5% unless another rate is agreed upon in writing | More info |
| Kansas | 15% | More info |
| Kentucky | 19% on loans of $15,000 or less; no maximum on larger loans | More info |
| Louisiana | 12% | More info |
| Maine | 6% unless another rate is agreed upon in writing | More info |
| Maryland | 16.5% for new cars; 22% for used cars two years or newer; 27% on used cars older than two years | More info |
| Massachusetts | 21% | More info |
| Michigan | 25% | More info |
| Minnesota | 18% for new cars in their first or second year; 19.75% for used cars two or three years old; 23.25% on used cars older than three years | More info |
| Mississippi | 18% for new cars in their first or second year; 21% for used cars up to two years old; 26.75% on used cars three and four years old; 28.75% on used cars older than four years | More info |
| Missouri | 10% unless the market rate is higher | More info |
| Montana | 15% or 6% above the prime rate, whichever is greater | More info |
| Nebraska | 16%; exceptions for some lenders | More info |
| Nevada | No maximum | More info |
| New Hampshire | No maximum | More info |
| New Jersey | 16% | More info |
| New Mexico | 36% | More info |
| New York | 16% | More info |
| North Carolina | 20% for cars one to three years old; 26% for cars four or five years old; 30% on used cars older than five years | More info |
| North Dakota | 6%; no maximum for state- and federal-regulated lenders | More info |
| Ohio | 8% | More info |
| Oklahoma | 10% | More info |
| Oregon | 9% unless another rate is agreed upon | More info |
| Pennsylvania | 18% for new and used cars up to two years old; 21% on used cars older than two years | More info |
| Rhode Island | 21% | More info |
| South Carolina | 8.75% | More info |
| South Dakota | 36% | More info |
| Tennessee | 18% | More info |
| Texas | 18%; may be higher for used vehicles | More info |
| Utah | No maximum but must not be "unconscionably" high | More info |
| Vermont | 18% for new and used vehicles up to two years old; 20% for used vehicles older than two years | More info |
| Virginia | 12%; some loans of $5,000 or more are exempt | More info |
| Washington | 12% | More info |
| West Virginia | 18%; up to 31% in some cases | More info |
| Wisconsin | No maximum | More info |
| Wyoming | 7% unless another rate is agreed upon | More info |
Military Members Get Extra Protections
There are two federal laws that offer potential interest savings for eligible members of the military community:
- Servicemembers Civil Relief Act (SCRA): Under SCRA, active-duty service members are entitled to have their interest rates on pre-service loans reduced to a maximum of 6%.
- Military Lending Act (MLA): The MLA limits interest rates for active-duty service members, spouses and certain dependents to 36% on certain loans, including unsecured loans you may use to purchase a vehicle.
How to Get a Lower Interest Rate on a Car Loan
Depending on your situation, there are a handful of steps you can take to qualify for a lower interest rate on a car loan:
- Improve your credit score. Get free access to your Experian credit report and FICO® Score☉, and look for opportunities to increase your credit score. The right steps for you will depend on your unique credit profile.
- Make a larger down payment. Experts generally recommend putting 20% down on a new car and 10% on a used car. However, the more you put down, the less of a risk you pose to the lender, which can translate to a lower rate.
- Choose a shorter repayment term. Lenders often offer lower interest rates on loans with shorter repayment terms because the risk of nonpayment is lower.
- Get a cosigner. If you don't have time to improve your credit, consider asking a loved one who has good credit to cosign your application. The lender will review both financial and credit profiles, which could result in a better interest rate.
The Bottom Line
If you're thinking about applying for an auto loan—especially if you have less-than-stellar credit—knowing your state's usury laws can help you gauge whether you're being taken advantage of by a predatory lender.
However, it's best to focus on trying to secure as low of an interest rate as possible. Taking steps, such as improving your credit, putting more down, opting for a shorter repayment term and getting a cosigner can help. Monitoring your credit regularly can help you better understand your credit profile and get insights into how you can build and maintain a good credit score.
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About the author
Ben Luthi
Ben Luthi has worked in financial planning, banking and auto finance, and writes about all aspects of money. His work has appeared in Time, Success, USA Today, Credit Karma, NerdWallet, Wirecutter and more.
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