Rising Treasury yields could push car loan rates higher, experts say. What buyers need to know

Simpleimages | Moment | Getty ImagesWith yields on Treasurys continuing to push higher, consumers are likely to see interest rates on their borrowing rise — including for car loans, experts say.Across both shor...

September 24, 2026

Simpleimages | Moment | Getty Images

With yields on Treasurys continuing to push higher, consumers are likely to see interest rates on their borrowing rise — including for car loans, experts say.

Across both short-term and long-term Treasurys, yields have climbed as stronger-than-expected economic data has fueled inflation concerns and expectations that the Federal Reserve could raise interest rates further.

Last week, the central bank's rate-setting committee boosted its federal funds rate — the rate banks charge one another for overnight lending — by a quarter-point to a target range of 3.75% to 4.0%. That benchmark can impact the interest rates consumers face when borrowing money, as well as how much their savings can earn.

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The yield on 30-year Treasury bonds reached 5.446% Thursday morning, a level not seen since 2004. The 10-year Treasury note yield — a benchmark for mortgage rates — jumped to 5.15%, which was last hit in 2006. The five-year Treasury yield was above 5% in mid-morning trading, which is the highest it's been since 2006.

"Many auto loan interest rates move with the five-year or 10-year Treasury note. When bond yields are on the rise, we typically see auto loan interest rates move up as well," said Patrick Manzi, chief economist for the National Automobile Dealers Association, a trade group that represents auto dealerships.

"Given the run-up in bond yields recently, we expect that auto loan rates will be increasing as well," Manzi said.

Auto loan rates have already been ticking up

Financing costs have already been edging higher, with loan interest rates for new vehicles rising about 20 basis points over the past two months and rates for used cars up about 10 basis points in that time, Jeremy Robb, chief economist for Cox Automotive, said in a Sept. 21 report.

"Those moves are unlikely to change the average payment substantially, but they may weigh more on consumer psychology and further discourage big-ticket purchases," Robb said.

Lenders generally consider a variety of factors when determining the interest rate charged for an auto loan, including credit scores and credit history, experts say. The higher your score, the better the rate you'll typically qualify for. The lower your number, the higher the interest rate you may face if you're approved for the loan.

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The term of the loan and whether it's for a new or used car also influences the rate. Loans for used cars generally come with higher interest rates.

In the second quarter of 2026, the average interest rate on a new-car loan was 6.35% — which is lower than the 6.79% average recorded a year earlier — and the average loan length was 5.8 years, according to a report from Experian, a credit reporting company. For used-car loans, the average rate was about 11.2% in the second quarter, down from 11.57% in the same period in 2025, with an average term of nearly 5.7 years. 

While the average price of a new car is about $50,000, according to auto-pricing company Kelley Blue Book, Experian's data shows that the average amount buyers financed for a new car was $43,610 in the second quarter, with a monthly payment of $765. The average amount financed by used-car buyers was $27,852, with an average monthly payment of $542.

How interest rates affect payments

Interest rates charged can vary widely. For instance, auto companies' financing arms may offer below-market rates as an incentive to buy their cars, although those deals are often tied to slower-selling vehicles or offered instead of a larger up-front discount, Manzi said.

Even a 1-percentage-point difference in an interest rate can make a notable difference in monthly payments and total interest paid.

For illustration: A rate of 6.35% on a $43,000 new-car loan over six years — 72 months — would result in a monthly payment of $720 and $8,823 in interest paid over the life of the loan, according to Bankrate's auto-loan calculator. At 7.35%, the monthly payment would be $740 and total interest paid would be $10,306. At 8.35%, the loan would come with a $761 monthly payment and $11,814 in total interest.

To get the best interest rate possible, car shoppers should take some proactive steps, said Joseph Yoon, consumer insights analyst for Edmunds, a car-shopping website.

Those include:

• Broaden your financing search. "Look beyond your primary bank or local credit union," Yoon said. "Research federal credit unions, many of which have open or low-barrier membership requirements and offer very competitive rates."

• Explore different car options. "Be open to considering alternative brands or models," Yoon said. Captive lenders sometimes run promotional financing rates … on specific models to move inventory, which could provide substantial savings over standard market rates."

• Get pre-approved before visiting the dealer. "Along the themes of research and planning ahead, securing pre-approval gives you a baseline interest rate, allowing you to compare it directly against any dealer or promotional financing options available at purchase," Yoon said.