Auto Loan Rates Drop to 7.01%. Act Before They Rise Again

If you're shopping for a new car right now, you've got a rare advantage working in your favor. 60-month auto loan rates dropped to 7.01% in January 2026—the lowest they've been since mid-2023, according to Bankrate's latest auto loan tracker. That's nearly half a percentage point lower than the 7.47% rate from January 2025. The timing couldn't be stranger. Vehicle prices hit an all-time high of $50,326 in December 2025, but financing costs fell. The math works if you act before this window closes.

Lower rates don't erase sticker shock, but they soften the blow. A half-point drop on a $50,000 loan saves you roughly $1,500 over five years. That's real money, especially when combined with what else happened in December: dealer incentives jumped to 7.5% of average transaction price, the highest level of 2025. EVs got hit even harder—discounts reached 18% as dealers scrambled to clear inventory after tax credit changes. You're looking at record prices, yes, but also record negotiating leverage and the best financing rates in 18 months.

Why This Rate Drop Matters for Your Monthly Payment

Credit markets eased enough in late 2025 to bring auto loans down from their peaks. Lenders are competing harder for buyers, and that competition shows up in your monthly payment. A $50,000 truck financed at 7.01% over 60 months costs about $990 per month. At last year's 7.47%, the same loan ran closer to $1,010. That's $20 a month, $240 a year, $1,200 over the loan term. Add in stronger trade-in values—used vehicle prices averaged $29,571 in December—and you've got equity to put down. Shrink the principal, and the rate advantage multiplies.

The risk? Rates won't stay this low. If inflation ticks up or credit conditions tighten, you'll be back above 7.5% by spring. And while incentives are high now, inventory is normalizing. When supply stabilizes, dealers pull back on discounts. The current setup—low rates, high incentives, strong trade values—won't last through February.

My Verdict

Lock in 7.01% financing now if you're buying in the next 30 days. Don't wait for prices to drop—they won't. But you can control your interest rate and your negotiating position. Focus on EVs if you want the deepest discounts. Bring a strong trade-in to reduce what you're borrowing. Check your credit score before you walk into a dealership, because that 7.01% rate assumes good credit. If your score is below 700, expect higher numbers. Get pre-approved through your bank or credit union first—it gives you leverage and a backup if dealer financing disappoints. This is the best rate environment since mid-2023. Use it before it vanishes.