What Is the Highest Interest Rate on a Car Loan?
Auto loans aren’t all created equal. As you look at different options, you need to focus on more than the interest rate attached to every loan offer. According to Experian first quarter data, average rates range from 5.18 percent to 21.32 percent, depending on credit and vehicle type. And these are just averages — individual lenders may charge max rates of 30 percent or more.
But if you’re wondering what the highest rate on a car loan can be, the answer involves a few factors, including what state you live in and how much money you’re borrowing.
Max auto loan interest rates differ by state
You might think about a bank or a car dealer as the place where your interest rate is determined. But the final word on the maximum interest rate you can be charged lies with your state’s legislature.
States oversee usury laws, a legal framework designed to cap the interest a lender can charge a consumer. If you have impeccable credit, usury laws really aren’t something to worry about — you’re in line for the best offer possible. However, if you have a history of late payments, excessive spending or bankruptcy, you may only qualify for a sky-high interest rate.
The ceiling on the interest rate you could be charged depends on your lender and where its headquarters are located. There’s a wide gap in limits from state to state.
To illustrate, a 10 percent limit applies to “money, goods or things in action in California.” But if you live next door in Nevada, a lender could technically charge you anything they want, because the state has no guidance for maximum usury laws. And if you live in California and are buying a car through a Nevada-based lender, you could still be offered an extremely high interest rate.