Flexible and affordable, auto finance is one of the most popular ways to purchase a car in the UK. A good understanding of the average car loan interest rate is one of the best ways to make smart and informed decisions when choosing a lender. In this article, we’ll take a closer look at benchmark car loan interest rates in the UK, as well as exploring the difference between the Bank of England rate, cash interest rate and APR (Annual Percentage Rate).

Britain: a nation of borrowers

Brits love to borrow, with the latest data from the Finance and Leasing Association (FLA) revealing more than four in every five new cars purchased by individual motorists in 2022 were funded by lenders. With so many benefits on the table, it’s no surprise auto finance is such a popular option in the UK.

What’s considered ‘average’ in the UK?

Average car loan interest rates can vary significantly between lenders. Factors like your personal credit score, financial history and the type of loan you apply for can also influence your interest rate. So, what’s considered ‘average’ in the UK?

Bank of England interest rate

The current interest rate stated by the Bank of England is 5.25% though this is expected to increase over the coming months. Most lenders take this base rate, then add to it based on a variety of factors. It’s rare to find any type of loan, whether it’s a home mortgage, cash loan or auto finance agreement, that uses the base interest rate stated by the Bank of England.

Cash interest rate

This is the interest rate the lender chooses to use on the principal loan amount. For example, if you borrow £10,000 at an interest rate of 6%, you’ll be paying an additional £600 in the first year. It describes the cost of borrowing the money itself and doesn’t include any fees or charges added by the lender. Using a car finance calculator is a quick and easy way to crunch the numbers.

Annual Percentage Rate (APR)

APR offers a more comprehensive view of the total cost of your loan. As well as the cash interest rate it also includes extra fees and charges. For example, if you’re offered a car loan with a cash interest rate of 7%, but the APR is 12%, you’ll be paying 5% in fees.

APR is designed to provide transparency to borrowers and make it as easy as possible to calculate the total cost of your loan. Comparing APRs offered by different lenders is one of the best ways to secure a good deal on car finance.

In the UK, borrowers with excellent credit scores should aim for an APR of 10.9%. This is considered a good average car loan interest rate and allows to enjoy the benefits of auto finance without absorbing too many extra fees or charges.

Get a great deal with My Car Credit

Why settle for an average car loan interest rate when you could unlock an even better deal? At My Car Credit, we’re committed to helping Brits secure best-in-class APR. Rates vary depending on factors like your credit score but ultimately, when you enlist the help of My Car Credit, you’ll enjoy the peace of mind you’re securing a great deal.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating


  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed


  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs


  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit


  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past


  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan

X monthly repayments of

Typical rate

Loan amount

Total payable




*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!