What Credit Score Do I Need to Buy a Car?

A car is a necessity for a lot of us—either for work, school or just getting around every day. But not everyone can afford a decent car outright. Enter the auto loan. They’re a convenient way to split the cost into affordable monthly chunks. So, what is a good credit score to buy a car? In short, you’ll probably get a better interest rate if your score is over 661. But if your credit score is lacking, loans are available at nearly all credit levels.

In this article, we’ll take you through the ins and outs of credit and car loans. We’ll start with a brief overview of the credit scores you need to aim for to get into the non-prime, prime and super prime lending markets. Then, we’ll explore subprime auto loans. Finally, we’ll talk about what you need to do to get pre-approved for a car loan.

What Is a Good Credit Score to Buy a Car?

You might think that getting an auto loan is almost impossible, but that’s actually not the case! Most people find auto loan options—even if they have truly dismal credit scores. Having said that, the better your credit score, the lower your auto loan interest rate will be and the less you’ll repay overall.

Intrigued? Let’s take a look at VantageScore’s credit scoring model:

• Super prime: 781-850
• Prime: 661-780
• Non-prime: 601-660
• Subprime: 500-600
• Deep subprime: 300-499

The average amount people borrow doesn’t change too much between the subprime and the super prime tiers. Borrowers tend to choose less expensive vehicles in the deep subprime market, however.

Why Bad Credit Scores Mean Higher Interest Loans

Imagine you want a new car that’s worth $33,000. If you have a great credit score and get a 60-month loan with a 3.24% interest rate, you’ll pay around $596 per month for your vehicle—and $35,790 in total. 

If you have a really poor credit score, your 60-month loan might come with a 12% interest rate. In that case, you’ll pay around $734 per month, or $44,044 overall—a full $8,254 more than someone with stellar credit.

In a nutshell, lower credit scores don’t just mean higher monthly payments—they also mean more money spent over five years. Meanwhile, borrowers with better credit can potentially stash over $8,000 in their savings accounts.

Things get even worse for borrowers in the deep subprime market if they buy used cars rather than new cars. Some unfortunate consumers pay more than 20% interest on their loans. 

The Problem with Subprime Auto Loans

If you have a lower-than-average credit score, you might find yourself languishing in the subprime market. On the one hand, consumers with bad credit can still buy vehicles using subprime loans, but on the other, subprime loans are notoriously risky. 

Subprime loans—also known as near prime, non-prime, subpar or second-chance loans—come with sky-high interest rates, voluminous fees and and often, longer payment terms.

Before you opt for a subprime loan, consider your options. Can you wait a while and improve your credit, for instance? Does the dealership offer in-house financing, and if so, do you qualify for that option? Subprime borrowers frequently find themselves under much greater financial pressure than prime borrowers, so don’t sign on the dotted line unless you absolutely have to.

How to Get Pre-Approved for a Car Loan

Don’t wander into the car dealership unprepared. Instead, check your credit score in advance and get pre-approved for an auto loan before you shop. 

You can apply for auto loan pre-approval at your bank, or you can apply online. Many consumers find online applications much easier to complete—plus they can compare different rates without leaving home. 

When you apply, the lender will perform a hard credit check, and they’ll also ask you numerous questions about your finances, including your monthly income. If you’re approved, you’ll get a loan proposal, complete with an interest rate and repayment terms.

Before you go car shopping, think about what you can comfortably afford to repay. Don’t max out your loan approval just because you can—choose an affordable vehicle instead. 

Keep an Eye on Your Score to Know Where You Stand

It can be hard to save up enough money to buy a car outright. Thankfully, auto loans aren’t hard to qualify for—even if you have less-than-perfect credit. The better your credit, the lower your interest rate might be.

Don’t spring for a subprime or non prime loan unless you have no other choice. Instead, improve your score and snag a better interest rate. You can take the first step by signing up with ExtraCredit, which includes Track It. View 28 of your credit scores—including the ones auto lenders see—to know where you stand and what areas you need to work on.

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