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Shopping car loan rates before you visit the dealer is the easiest way to save on a car. In 2026 there is a second lever: a federal tax deduction for interest on some new-car loans.
Here are the official numbers for both, as published today.
Car loan rates in September 2026
| Lender | New car APR | Used car APR |
|---|---|---|
| PenFed (car buying service) | From 3.39% | From 4.34% |
| PenFed (standard purchase) | 4.19%–5.74% | 4.79%–6.24% |
| Bank of America | From 5.39% | From 5.59% |
| Capital One (Auto Navigator) | From 5.59% | From 6.50% |
| LightStream | 7.74%–17.74% | Rate shown when you apply |
Official “as low as” or range figures, checked September 23, 2026. They assume excellent credit; PenFed rates depend on term (36–84 months), Bank of America’s are for 60 months, Capital One’s for 60- and 72-month terms, LightStream’s include its AutoPay discount.
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The car loan interest deduction: official rules
| Rule | What the IRS says |
|---|---|
| Maximum deduction | $10,000 of interest per year |
| Tax years | 2025 through 2028 |
| Income phase-out | Starts above $100,000 MAGI ($200,000 joint) |
| Loan date | Originated after December 31, 2024 |
| Vehicle | New, final assembly in the US |
| Use and security | Personal use, loan secured by a lien |
| How to claim | Schedule 1-A with Form 1040, VIN required |
Source: IRS, tax deductions for working Americans and seniors, checked September 23, 2026.
Qualifying vehicles are cars, minivans, vans, SUVs, pickup trucks and motorcycles under 14,000 pounds gross vehicle weight rating. Leases and used vehicles do not qualify. Refinanced amounts are generally eligible, according to the IRS. You can take the deduction whether you itemize or claim the standard deduction.
What changed vs. last year
- Before: interest on a personal car loan was not deductible. IRS Topic 505 still says interest on car debt incurred on or before December 31, 2024 is not deductible.
- Now: the One, Big, Beautiful Bill Act, which the IRS also groups under its Working Families Tax Cuts pages, created the deduction for tax years 2025–2028.
- Guidance: Treasury and the IRS released proposed regulations on December 31, 2025. Lenders must report the interest they receive to the IRS.
- Filing: the IRS added Schedule 1-A; Part IV covers car loan interest.
For the other new deductions on your return, see our guide to the 2026 tax refund and new deductions.
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How to get the best deal and claim the deduction
- Check your credit first. These rates go to excellent credit. Our guide on reaching an 800 credit score shows what moves the number.
- Get a quote before the dealer. The CFPB notes you can go directly to a bank, credit union or other lender, and an outside quote can help you negotiate. PenFed, Bank of America (for customers with an online login) and Capital One all offer prequalification with no impact to your credit score.
- Compare the total cost, not the payment. Longer terms carry higher rates at PenFed, and they add months of interest. Keep a cash cushion too; here is how big your emergency fund should be.
- Confirm the vehicle qualifies for the deduction. Check the final assembly point on the vehicle information label, or decode the VIN with NHTSA’s tool, as the IRS suggests.
- Keep the lender’s interest statement and enter the VIN on Schedule 1-A when you file.
Lender notes
- PenFed: loans up to $150,000 and up to 125% financing. Anyone can join the credit union during the application. Its example: $20,000 new at 4.44% APR over 60 months is about $373.41 a month.
- Bank of America: BofA Rewards members get a 0.10%–0.50% rate discount not shown in the published rates. Example: $54,000 new at 5.39% APR over 60 months is $1,029 a month.
- Capital One Auto Navigator: prequalify, then shop participating dealers and see your rate on each car. The final credit application happens at the dealer.
- LightStream: no fees and no prepayment penalties. Rates without AutoPay are 0.50 points higher, and the best rates require excellent credit.
How we compared
- Checked: every rate on September 23, 2026, on each lender’s official page; tax rules only from irs.gov.
- Order: no ranking; lenders appear by starting new-car APR, from low to high.
- Independence: no lender paid for placement.
FAQ
How does a car loan calculator work?
It takes the amount financed, APR and term and returns the monthly payment. Use the price minus your down payment and trade-in, plus taxes and fees you finance.
What does a car loan payment calculator show that a rate table doesn’t?
The payment and the total interest. A lower rate over 84 months can still cost more in total than a slightly higher rate over 48 months.
Is the car loan calculator on Google accurate?
Any standard calculator gives a good estimate if you enter the real APR from your offer. Double-check against the lender’s own example, such as PenFed’s $373.41 for $20,000 at 4.44% over 60 months.
What is a car loan amortization calculator?
It splits each payment into interest and principal. Early payments are mostly interest, which is also the part the new deduction can cover if you qualify.
Can I deduct interest on a used car or a lease?
No. The IRS says the vehicle’s original use must start with you, so used vehicles and leases do not qualify.
For the full picture, see our hub Best Personal Loans 2026 (US), our comparison of the best personal loans of 2026 and our guide to personal loans for bad credit with fair terms.
Sources
- IRS — Tax deductions for working Americans and seniors (car loan interest)
- IRS — Guidance on the car loan interest deduction
- IRS — Schedule 1-A announcement
- IRS — Topic no. 505, Interest expense
- CFPB — Am I required to get my auto loan through a dealership?
- PenFed auto loans — official page
- Bank of America auto loans — official page
- Capital One Auto Navigator rates — official page
- LightStream new car loan — official page
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