The average auto loan interest rates across all credit profiles range from 5. 64% to 14. 78% for new cars and 7. 66% to 21. 55% for used cars. Enter ZIP Code.
The interest rates you are offered for auto loans are determined by a number of factors, the most significant of which is your credit score. Understanding typical auto loan interest rates can help you determine whether you would receive a favorable rate on your loan and can also give you an idea of what you might be eligible for.
The MarketWatch Guides team will analyze auto loan interest rates for both new and used cars by state, vehicle type, and credit score in this article. We’ll also go into more detail about how auto loans operate and where to look for the best rates that fit your credit situation.
The MarketWatch Guides Team is dedicated to giving you trustworthy information so you can choose the best financing option for your car. Since customers depend on us to deliver unbiased and precise information, we developed an extensive rating system to create our lists of the top auto loan providers. In order to rank the loan providers according to a variety of criteria, we gathered information on dozens of them. Following 300 hours of investigation, each provider received an overall rating; the top-ranked businesses were those with the highest points.
Unlocking the Secrets of Auto Financing with a Less-Than-Perfect Credit Score
So, you’re eyeing that shiny new car, but your credit score isn’t exactly gleaming like chrome. Fear not, fellow car enthusiast! While a 620 credit score might not land you the lowest interest rates, it doesn’t mean you’re out of the financing game. Let’s dive into the world of auto loans and explore how much car you can realistically afford with a 620 credit score.
Understanding the Credit Score Landscape
First let’s get acquainted with the credit score spectrum. A 620 score falls within the “fair” credit range, which means lenders view you as a moderate risk. While not ideal it’s far from a deal-breaker. According to Experian, the average borrower with a 620 credit score secured an auto loan with an APR of 8.86% for a new car and 13.28% for a used car in the first quarter of 2023.
Factors Influencing Your Loan Eligibility
Your credit score is just one piece of the puzzle. Lenders consider a variety of factors when determining your loan eligibility and interest rate, including:
- Down Payment: The more you put down, the less you need to borrow, reducing your risk and potentially lowering your interest rate.
- Debt-to-Income Ratio (DTI): This ratio measures how much of your income goes towards debt payments. A lower DTI indicates a better ability to handle additional debt.
- Loan Term: Opting for a shorter loan term might secure a lower interest rate but will increase your monthly payments.
- Vehicle Type: New cars often come with lower interest rates due to manufacturer incentives, while used cars typically have higher rates.
- Lender: Different lenders have varying criteria and interest rates. Shopping around is crucial for finding the best deal.
Maximizing Your Loan Potential
While you can’t change your credit score overnight, there are steps you can take to improve your loan prospects:
- Increase Your Down Payment: Saving up a larger down payment can significantly reduce your loan amount and improve your chances of securing a favorable interest rate.
- Shorten Your Loan Term: Consider a shorter loan term, even if it means higher monthly payments. This can lower your overall interest costs and demonstrate your commitment to responsible borrowing.
- Explore Co-signer Options: If you have a creditworthy friend or family member, consider applying with them as a co-signer. This can boost your eligibility and potentially lower your interest rate.
- Shop Around for Lenders: Don’t settle for the first offer. Compare rates and terms from multiple lenders to find the best deal. Online lenders often offer competitive rates and convenient application processes.
Remember, a 620 credit score doesn’t have to be a roadblock to your dream car. By understanding the factors that influence your loan eligibility and taking steps to improve your financial standing, you can secure an auto loan that fits your budget and gets you cruising in style.
Additional Resources:
- Upstart: Learn more about Upstart’s loan options for borrowers with less-than-perfect credit: https://www.upstart.com/credit-score/620-credit-score
- Experian: Get a free credit report and score, and explore resources for improving your credit: https://www.experian.com/
Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult a qualified financial professional for personalized guidance.
How To Get Lower Interest Rates on Your Auto Loan
If you’re looking for the best auto loan rates, these tips may help:
- Boost your down payment: A larger down payment lowers the loan-to-value ratio on your vehicle, potentially resulting in a better interest rate.
- Receive a discount: In the car finance sector, one of the most popular discounts is for setting up automatic payments, which can lower your interest rate by up to 0%. 5%.
- Obtain a co-signer: If your credit is poor, you may be able to obtain a lower interest rate by having a friend or relative with excellent credit co-sign a loan with you.
- Go for a newer vehicle: Most lenders base their interest rates on the age of the vehicle. You might be able to obtain better auto loan interest rates for your credit score if you can locate a newer vehicle in your price range.
- Select a shorter loan duration: Although longer loan terms typically have higher interest rates, they also have lower monthly payments. A shorter loan term will probably result in a lower interest rate and lower total interest paid over the course of the loan if you can afford the higher payments that accompany it.
- Boost your credit score: When you refinance your car, a higher credit score will enable you to receive the best deals. Later on, we’ll go over specific steps to take in order to achieve this.
- Refinance later: You might gain from refinancing your auto loan in the future if your bad credit has left you with a high interest rate. By taking advantage of the current interest rate and paying your bills on time, you can raise your credit score and eventually gain favor with lenders.
Source: Capital One
Average Car Loan Interest Rates by Vehicle Type
The type of vehicle you choose to finance can influence the rates you receive. The cost and demand of various car models vary, which affects how much interest you pay for an auto loan over time. The chart below showcases average rates for car loans for each vehicle type.
| Vehicle Type | New Car Loan Interest Rates | Used Car Loan Interest Rates |
|---|---|---|
| Sedans | 8.13% | 12.86% |
| SUVs | 6.65% | 11.21% |
| Trucks | 6.63% | 10.55% |
| Electric Cars | 6.27% | 10.01% |
*Rates were determined using the combined state average auto loan rates for each type of vehicle, as stated by Edmunds in February 2024.
KEY FACTORS You Need to Know about Credit Scores and Car Loans (Former Dealer Explains)
FAQ
Is 620 a good credit score to buy a car?
Can I get a $40,000 car with a 600 credit score?
How big of a loan can I get with a 620 credit score?
What interest rate can I get with a 620 credit score auto loan?
|
Credit Score Range
|
New Car Loan Rates
|
Used Car Loan Rates
|
|
661 to 780
|
7.01%
|
9.73%
|
|
601 to 660
|
9.60%
|
14.12%
|
|
501 to 600
|
12.28%
|
18.89%
|
|
300 to 500
|
14.78%
|
21.55%
|
What credit score do you need for a car loan?
Most used auto loans go to borrowers with minimum credit scores of at least 675. For new auto loans, most borrowers have scores of around 730. The minimum credit score needed for a new car may be around 600, but those with excellent credit often get lower rates and lower monthly payments.
Can you finance a car with a 650 credit score?
Yes, it’s possible to get a car loan with a 650 credit score, although your rates might not be as good as those for an applicant with better credit. If you shop around and aren’t happy with the interest rates you’re quoted, you might consider working on your credit before taking out a loan.
What is a good credit score for a new car?
For new auto loans, most borrowers have scores of around 730. The minimum credit score needed for a new car may be around 600, but those with excellent credit often get lower rates and lower monthly payments. Lower credit scores may result in less-than-favorable loan terms for the car you want to buy.
Can you get a car loan without a good credit score?
Lenders base your interest rates primarily on your credit score. But you can still get a decent rate without top-tier credit. To see how much of a difference a higher credit score can make for your rates, check out the average car loan interest rates by credit score. Your hometown also impacts the rate you receive.