will car interest rates go down in 2025

If you’re thinking about buying a car, you’re likely keeping a close eye on your budget, and the monthly payment is a huge part of that. The interest rate attached to your auto loan can mean a difference of hundreds of dollars each year. With rates having climbed over the past few years, many hopeful buyers are left wondering, will car interest rates go down in 2025?

While no one has a crystal ball, we can look at current economic trends and expert predictions to get a clearer picture of what the road ahead might look like for your wallet.

What’s Driving the Forecast for 2025?

The direction of car interest rates is closely tied to the actions of the Federal Reserve. The Fed raises or lowers its benchmark rate to control inflation. After a period of rapid increases to cool the economy, the consensus among many economists is that the Fed is likely to begin cutting rates in late 2024 or 2025. If this happens, it would create downward pressure on all kinds of loans, including those for new and used cars.

Will Car Interest Rates Go Down in 2025?

Based on this economic outlook, the short answer is: it’s likely. Most financial experts project a modest decline in auto loan rates throughout 2025. However, it’s important to be realistic. Don’t expect a sudden, dramatic drop back to the historic lows seen a few years ago. The decrease is expected to be gradual, and rates will likely remain higher than what we became accustomed to in the previous decade.

What You Can Do While You Wait

If your car purchase can be flexible, waiting could indeed save you money on interest. In the meantime, focus on strengthening your financial position. Check your credit score and work on improving it, as a higher score will qualify you for the best available rates when you’re ready to buy. You can also start saving for a larger down payment, which reduces the amount you need to borrow and can also help you secure a more favorable loan.

Smart Steps for Your Next Auto Loan

Whether you buy now or later, being a prepared borrower is key. Always get pre-approved for a loan from your bank or credit union before visiting the dealership. This gives you a bargaining chip and a clear understanding of what you can afford. Finally, don’t forget to shop around. Compare offers from multiple lenders to ensure you’re getting the most competitive rate possible for your situation.

While a decrease in car interest rates in 2025 seems probable, the best strategy is to focus on what you can control. By improving your credit and shopping wisely, you’ll be in the driver’s seat to secure a good deal whenever you decide to make your move.