What credit score is needed to buy a car?

June 28, 2019

credit to buy car

Buying a car is easy if you have the upfront cash, but if you are looking to finance a vehicle purchase you will need to pay close attention to your credit score. Auto lenders use your credit score to determine not only loan eligibility, but other important factors including interest rates, loan terms, and monthly payment amounts.

The recommended credit score needed to buy a car is 660 and above. This will typically guarantee interest rates under 6%. Auto lenders do accept nonprime and subprime customers, however, the interest rates are significantly higher.

How will your credit score affect your auto loan rates?

Rather than declining borrowers with low credit scores, auto lenders will raise the annual percentage rate to adjust for the added risk. Although you may not need to raise your credit score to get a loan, it can be worth your effort in order to lower your average auto loan rate.

Because borrowers with lower credit scores are a sign of negative borrowing practices, a lender will adjust average loan rates to cover their risk.

Average Auto Loan Rates in 2018

Credit Score Average Loan Rate for a New Car in 2018 Average Loan Rate for a Used Car in 2018
Super Prime 781–850 3.4% 4.1%
Prime 661–780 4.4% 5.9%
Nonprime 601–660 7.5% 10.6%
Subprime 501–600 12.1% 16.7%
Deep Subprime 300–500 14.9% 19.5%

Credit scores used for car loans

Although most lenders do not set a minimum score needed for a loan, they will offer worse loan rates and terms for borrowers with lower scores. By adjusting the annual percentage rates on loans, lenders can cover the additional risk of lending to a borrower with a low score.

In 2018, Experian reported the average credit score used to secure a new car loan was 722 and 655 for securing a loan on a used car. Even when offered interest rates above 7%, borrowers with credit scores below 660 accounted for 68% of used vehicle loans and 40% of new vehicle loans.

Distribution of credit scores used for auto loans in 2018

Credit Score New Cars Used Cars
Super Prime 781–850 28% 12%
Prime 661–780 45% 36%
Nonprime 601–660 17% 22%
Subprime 501–600 10% 25%
Deep Subprime 300–500 0% 5%

How will your credit score affect your total loan?

In the first half of 2018 customers signed loans that were on average $30,958 when purchasing a new car and $19,708 when purchasing a used car. Borrowers signed loans that had a length of term on average of 68-months for a new car, and 64-months for a used car.

Rather than shopping for an auto loan based off of the average loan rate, monthly payments, or length of term, it is best to look at total cost. The total cost of a loan is easier to compare across lenders as it only compares the total out of pocket cost you incur over the contract.

Based on the average loan amounts, length of term annual percentage rate, here is how much a credit score can affect your total loan costs.

Total cost of loan based on credit score

Credit Score Total cost of a $30,958 loan with a 68-month term Total cost of a $19,708 loan with a 64-month term
Super Prime 781–850 $34,079 $21,974
Prime 661–780 $35,034 $23,019
Nonprime 601–660 $38,096 $25,885
Subprime 501–600 $42,924 $29,898
Deep Subprime 300–500 $46,025 $31,847

How to lower your loan total cost

In addition to shopping around for the best car loan and negotiating with lenders, you can save money by raising your credit score before shopping for a car loan. Making a positive impact on your credit score can take months of positive spending, borrowing, and repayment history.

Keeping track of your credit score is equally as important when shopping around for auto loans as lenders will issue a hard inquiry into your credit history in order to determine eligibility. These hard pulls can add up quickly, and a hard inquiry can result in a 2-3 point drop to your credit score. When it comes to raising your credit score quickly, credit repair is an option to remove negative entries from your credit report.

Call For Credit Assessment

Credit repair isn't impossible. As credit repair professionals, we have the tools and knowledge to help you dispute inaccurate items on your credit report and improve your score, so you can get a better auto loan.

Call 1-855-255-0139
Best company review badge
Best Credit Repair Companies
2016 gold top ten review
Best Credit Repair Companies of 2018

Confirming Your Phone Order

Phone Confirm