New cars parked at the Holden manufacturing plant in Adelaide, Australia. (Photo by Morne de Klerk/Getty Images)

Is your car about to give out? It might be a good time to upgrade, especially if you have your eye on a new one.

Interest rates for car loans overall are down this quarter when compared to the start of 2012, but they are much cheaper for new car loans, according to a report from Wallet Hub, a financial comparison Web site.

The average rate on a 36-month loan for a new car fell to 4.31 percent this quarter, about 20 percent lower than the rate for a similar loan on a used car. That compares to 2012, when the rates for new car loans were about 10 percent lower than those on used car loans.

The lower rates on new cars might be enough to encourage people to take another look at a new car. “The price for a new car is generally higher than that of a used car,” says Jill Gonzalez, a spokeswoman for Wallet Hub, “but that’s still something to take advantage of if you’re a consumer.”

Some people can reduce the amount they pay in interest — no matter what car they buy — if they pay down their car loans faster than required, she says. Wallet Hub analyzed financing offers from 157 lenders, including banks, credit unions and car dealerships, and calculated what people would spend in interest to buy new and used cars.

The best deals are still reserved for people with the best credit. A borrower with an excellent credit score, one of 720 and up, might pay about $6,000 less in interest charges over the life of a five-year loan than someone with fair credit, or a score between 620 and 659, the report found.

The disparity shows that even though terms are more favorable for car buyers overall, banks and dealerships still prefer borrowers with long credit histories, steady payment records and low debt levels. “They want to know they’ll be getting their money back as quickly as they can,” Gonzalez says.

Of course, actual loan terms will vary based on a person’s circumstances. Lenders will factor in things that weren’t accounted for in the study, like income, location, special promotions and a person’s negotiating skills, Gonzalez says.

More people are buying cars and trucks, partly because of a drop in gas prices. And as our columnist Michelle Singletary points out, some people are stretching out their auto loans as a way to afford more expensive cars, but the move can cost them more in the long run.

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