Car loan interest rates are typically lowest for which type of car?

Car loan interest rates are typically lowest for new cars because lenders view them as lower-risk investments. New cars have a known market value, and they come with factory warranties and the latest safety features, which make them attractive to both consumers and financial institutions. Lenders are often more willing to offer favorable terms, including lower interest rates, because the depreciation rates for new cars gradually stabilize after the first couple of years. This perception of stability and the increased likelihood that borrowers will keep up with payments make financing for new vehicles more secure and appealing for lenders.

In contrast, used cars generally carry higher interest rates due to their depreciation and potential maintenance issues, which could affect a borrower’s ability to repay the loan. Certified pre-owned vehicles may offer a balance between new and used cars, but they typically do not receive the same low rates as outright new cars, since their resale value and potential risk are higher than a brand-new vehicle. Luxury cars, while often desirable, can also come with higher interest rates because they tend to depreciate quickly and may be viewed as riskier investments by lenders.