Question

What is the difference in loan interest rates between new and used cars?

Used cars have a higher interest rate than new cars

New cars have a higher interest rate than used cars

New cars have a lower interest rate until they depreciate

There is no significant difference in loan interest rates between new and used cars

Answer 1

Used cars have a higher interest rate than new cars.

Why: lenders view used cars as higher risk (lower collateral value, older condition), so rates for used‑car loans are typically higher. Manufacturers also subsidize new‑car financing (0%–low APR promotions) that aren’t available for most used cars.

Typical difference and exceptions: the spread varies by credit score and lender — often a few tenths to a few percentage points (larger for borrowers with weaker credit). Certified pre‑owned programs or strong credit union/dealer offers can narrow or occasionally eliminate the gap, but as a rule used‑car loans cost more in interest.