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Despite taking out smaller auto loans, car buyers are committing to even higher monthly payments.

That’s because it’s more expensive to finance cars. New auto loan rates climbed to an average of 7.2% last quarter, up from 6.1% a year ago, while used rates jumped from 10.4% to 11.9%, according to a new Experian report. If you have poor credit, meanwhile, you can expect car loan rates that are much higher than average (see more on this below).

Car buyers are using a variety of strategies to adapt to an environment with painful loan rates and stubbornly expensive auto prices. They appear to be taking out shorter loans to avoid paying more interest: The average loan term was 67.9 months in the fourth quarter, down from 69.3 a year ago. Even so, the average new car payment rose to $738 in the fourth quarter, up from $720 a year ago.

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It’s natural to see buyers opt for shorter loan terms considering the high rate environment, according to Melinda Zabritski, head of automotive financial insights at Experian.

The average amount financed in the fourth quarter was $40,366, which is about $1,143 less than a year ago. The drop in loan sizes could be due to the recent dip in car prices as inventory has improved.

There’s also been an increase in cash sales, with all-cash purchases making up more than 20% of new vehicle transactions in the fourth quarter. “As we started to see those rates increase, we certainly started to see more cash come into the market,” Zabritski said in a presentation.

How credit scores affect loan rates

For car buyers with poor credit and small down payments, the auto financing landscape is especially perilous now.

A large majority of car buyers financing new vehicles, nearly 82%, had credit scores of 660 or above in the fourth quarter. If your score is lower, however, you won’t qualify for the best financing rates and your monthly payments will likely be much higher.

Here’s a breakdown of the average new car loan rate by credit score:

  • Super prime (781-850): 5.64% APR
  • Prime (661-780): 7.01% APR
  • Near prime (601-660): 9.60% APR
  • Subprime (501-600): 12.28% APR
  • Deep subprime (300-500): 14.78% APR

And here are average loan rates by credit score for used vehicle financing:

  • Super prime (781-850): 7.66% APR
  • Prime (661-780): 9.73% APR
  • Near prime (601-660): 14.12% APR
  • Subprime (501-600): 18.89% APR
  • Deep subprime (300-500): 21.55% APR

More from Money:

8 Best Car Loan Rates

Gas Prices Are on the Rise Again. Here’s Why

The Overall Best Car for the Money in 2024

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