--- title: Car Buyers Are Taking out Smaller Loans, but Monthly Payments Are Still Higher description: As auto loan rates rise, more car buyers are choosing shorter loan terms. But average monthly car payments are up anyway, Experian reports. authors: - name: Pete Grieve role: Lead News Reporter url: https://money.com/author/pete-grieve/ bio: Pete Grieve is a personal finance reporter. In his time at Money, Pete has covered everything from car buying to credit cards to the housing market. education: University of Chicago, BA Political Science at_money_since: 2022 articles: 599 covers: - Loans - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes social: - https://twitter.com/pete_grieve - https://linkedin.com/in/pete-grieve-b5aa02138 - https://www.facebook.com/petegrieve4 editors: - name: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Loans - Banking - Business - Career Advice - Credit - Credit Cards - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2024-03-05T19:20:41.000Z' modified: '2024-03-05T19:20:41.000Z' section: Loans tags: - cars - News word_count: 429 canonical: https://money.com/car-loans-smaller-monthly-payments-higher/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Photo-illustration of a car with a piggy bank tied to the roof.](https://img.money.com/2024/03/News-Car-Loans-Monthly-Payements.jpg) Despite taking out smaller [auto loans](https://money.com/best-auto-loan-rates/), car buyers are committing to even higher monthly payments. That’s because it's more expensive to finance cars. New auto loan rates climbed to an average of 7.2% last quarter, up from 6.1% a year ago, while used rates jumped from 10.4% to 11.9%, according to a new [Experian report](https://www.experian.com/automotive/auto-credit-webinar-form). If you have poor credit, meanwhile, you can expect car loan rates that are much higher than average (see more on this below). Car buyers are using a variety of strategies to adapt to an environment with painful loan rates and stubbornly expensive auto prices. They appear to be taking out shorter loans to avoid paying more interest: The average loan term was 67.9 months in the fourth quarter, down from 69.3 a year ago. Even so, the average new car payment rose to $738 in the fourth quarter, up from $720 a year ago. ## Considering a new car? Keep it safe with a Car Warranty ### Getting a free quote is the first step to protecting your investment. Click on your state below to get started! [See Details](https://money.com/pr/f3f27f2b79bc?ap_referrer=%2Fcar-loans-smaller-monthly-payments-higher%2F) It’s natural to see buyers opt for shorter loan terms considering the high rate environment, according to Melinda Zabritski, head of automotive financial insights at Experian. The average amount financed in the fourth quarter was $40,366, which is about $1,143 less than a year ago. The drop in loan sizes could be due to the [recent dip in car prices](https://money.com/car-prices-drop-inventory/) as inventory has improved. There's also been an increase in cash sales, with all-cash purchases making up more than 20% of new vehicle transactions in the fourth quarter. “As we started to see those rates increase, we certainly started to see more cash come into the market,” Zabritski said in a presentation. ## How credit scores affect loan rates For car buyers with poor credit and small down payments, the auto financing landscape is especially perilous now. A large majority of car buyers financing new vehicles, nearly 82%, had [credit scores](https://money.com/what-is-a-credit-score/) of 660 or above in the fourth quarter. If your score is lower, however, you won’t qualify for the best financing rates and your monthly payments will likely be much higher. Here’s a breakdown of the average new car loan rate by credit score: - Super prime (781-850): 5.64% APR - Prime (661-780): 7.01% APR - Near prime (601-660): 9.60% APR - Subprime (501-600): 12.28% APR - Deep subprime (300-500): 14.78% APR And here are average loan rates by credit score for used vehicle financing: - Super prime (781-850): 7.66% APR - Prime (661-780): 9.73% APR - Near prime (601-660): 14.12% APR - Subprime (501-600): 18.89% APR - Deep subprime (300-500): 21.55% APR ![](https://s3.consumersadvocate.org/prd/image/image/28512/medium_1ae7409e-8425-4103-9204-bfe70b5e6c0b.png) Stop paying for costly car repairs and get an Extended Car Warranty! [See Details](https://money.com/pr/ub9375bc33e8?ap_referrer=%2Fcar-loans-smaller-monthly-payments-higher%2F) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/car-loans-smaller-monthly-payments-higher/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Loans", "item": "https://money.com/loans/" }, { "@type": "ListItem", "position": 3, "name": "Auto Loans", "item": "https://money.com/auto-loans/" }, { "@type": "ListItem", "position": 4, "name": "Car Buyers Are Taking out Smaller Loans, but Monthly Payments Are Still Higher" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/car-loans-smaller-monthly-payments-higher/#webpage", "url": "https://money.com/car-loans-smaller-monthly-payments-higher/", "name": "Car Buyers Are Taking out Smaller Loans, but Monthly Payments Are Still Higher", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2024-03-05T19:20:41.000Z", "mainEntity": { "@id": "https://money.com/car-loans-smaller-monthly-payments-higher/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/car-loans-smaller-monthly-payments-higher/#breadcrumb" }, "dateModified": "2024-03-05T19:20:41.000Z" }, { "@type": "NewsArticle", "headline": "Car Buyers Are Taking out Smaller Loans, but Monthly Payments Are Still Higher", "articleSection": "Loans", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2024/03/News-Car-Loans-Monthly-Payements.jpg", "width": 2880, "height": 1920, "caption": "News-Car-Loans-Monthly-Payments" } ], "author": [ { "@type": "Person", "name": "Pete Grieve", "url": "https://money.com/author/pete-grieve/", "@id": "https://money.com/author/pete-grieve/#author", "description": "Pete Grieve is a personal finance reporter. 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