Current APR for car loans in the UK: a used‑car guide for bad credit
Fast facts
- Bank Rate was held at 3.75% (base rate) on 5 Feb 2026, by a 5–4 vote.
- Net consumer‑credit borrowing fell to £1.5bn in Dec 2025 from £2.1bn in Nov; credit‑card net borrowing was £0.7bn.
- In 2024, there were around 6.4m outstanding motor‑finance agreements, with total advances around £92bn.
- Sub‑prime lenders reported a 33% average APR, a 46% average maximum APR, and one maximum APR of 76%.
Where the market sits right now
Bank Rate stayed at 3.75% (base rate) in Feb 2026, with a 5–4 MPC vote. CPI inflation was 3.4% (annual inflation rate) in Dec 2025.
In Dec 2025, the effective annual interest rate on new personal loans was 8.78% (APR-equivalent), and credit cards averaged 21.56%. Net consumer‑credit borrowing was £1.5bn (down £0.6bn from Nov’s £2.1bn).
What the current APR for car loans looks like for used cars
In FCA modelling for 2022/23, the “average” used agreement had an average value of £15,300 and a weighted‑average APR of 13.2%. The modelled sub‑prime agreement averaged £8,800 at 33.1% APR.
In the FCA lender survey, the used segment had a weighted‑average APR of 13% and a weighted‑average lender maximum APR of 28%. In the subprime slice, lenders reported a weighted‑average APR of 33%, a minimum (weighted‑average) of 13% (APR), and a maximum (weighted‑average) of 46% (APR); the highest maximum reported was 76%. Zokaityte notes prime promos near 2–6% APR, subprime used deals 15–25% (APR) or higher.
For loans for people with bad credit, competition is thinner. In the FCA sample, sub‑prime is about 4% of new agreements, and the top three lenders made more than 86% of sub‑prime new business volume in 2023.
Why loans for people with bad credit cost more
Lenders price by risk tiers. The FCA says lenders often use 7–8 tiers, and APR rises as assessed credit risk rises.
Bank of England write‑offs show why missed‑payment risk is priced. “Other lending to individuals” write‑offs were £297m in Q2 2025 versus £157m in Q2 2024 (+89% year‑on‑year). Credit‑card write‑offs were £286m in Q3 2025 versus £291m in Q3 2024 (‑1.7% year‑on‑year).
EY expects UK consumer‑loan defaults to rise to 1.0% (default rate) across 2026–2028, from 0.9% (default rate) across 2024–2025.
In an FCA‑commissioned online survey (n=5,000), 61% of current holders did not know their exact interest rate (APR) when first asked (39% did).
Steps that could improve your APR
On £8,800 over 48 months, 13.2% APR is about £237/month and £11,374 total; 33.1% APR is about £333/month and £15,980 total (calculation using FCA averages). That’s about £4,606 extra from APR alone.
Four tips I’d actually use:
- Borrow less.
- Bring a deposit.
- Ask what’s optional: add‑ons showed up in 42% of transactions, averaging £528.80.
- Shop around: 28% researched via comparison sites; 8% arranged via them; among sub‑prime‑type consumers, 50% researched and 17% arranged.
For a simple refresher on routes, try Car Loans UK.
A quick note on APR “range games”
The BBC reported some retailers could “adjust the APR”, and it gives an example offer of 8.9% APR. It also describes a “minimum APR” of 6.9% and a starting offer of 13.9%.
The FCA’s proposed redress scheme covers 6 April 2007 to 1 Nov 2024 and estimates redress of £8.2bn if take‑up is 85%, or up to £9.7bn if take‑up is 100%. The Guardian, The Telegraph and the Financial Times reported redress around £700 and running costs around £2.8bn.
If you need a loan for a used car and have bad credit, you don’t have to guess. Start with Bad Credit Motor Finance, then compare HP and PCP. When you’re ready, apply here Bring your income details and address history. Compare total repayable, not just the monthly. Then choose the current APR for car loans you can afford and keep paying.
Before you hit submit, do one last “sleep on it” check. Can you still pay if petrol, insurance, or repairs jump? If yes, great, go for it. If not, downsize the car or extend the deposit plan. Loans for people with bad credit work best when the current APR for car loans is boring.
At Bad Credit Motor Finance, we’re here to try to help you find the best vehicle financing solutions that make fuel-efficient driving accessible, even on a tight budget.
