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What Minimum Credit Score Is Needed to Buy a Car?

What Minimum Credit Score Is Needed to Buy a Car?

Believe it or not, securing a car loan with a low credit score used to be relatively easy. However, the risk of so many people defaulting on their loans has caused lenders to tighten their requirements. How tight? If you're in the market for a new set of wheels—even if they're not-so-shiny pre-owned ones, you're likely wondering what minimum credit score is needed to buy a car. A recent report by Experian on the State of the Automotive Finance Market revealed the following:

Minimum credit scores for auto loans vary from lender to lender, but the average score for a new car loan is 733. For a used car loan, it's 675. Prime borrowers account for the majority of new loan originations. Fortunately, there are many ways to qualify for good loan terms with a much lower score.

Although almost anyone with any score can acquire some type of vehicle financing, lower scores tend to attract strict loan terms and high interest rates. In this post, we'll explore options for individuals who fall on the bottom end of the credit score scale and explain how to get the best car loan deal with an undesirable credit profile.

toy blue car as guy signs loan

Can I Get A Car Loan With A Credit Score Of 600?

Quite simply: yes. However, although it's possible, it is more difficult. That's why it's important to understand what credit scores car loan lenders use and how you rate as a borrower.

While some lenders will use traditional FICO or VantageScore ratings, most use industry-specific scores like the FICO Auto Score. This predictive scoring model uses a scale range of 250 to 900 points, giving lenders a more precise view of your credit risk.

The model not only focuses on key factors most scoring models use to calculate your creditworthiness, including payment history, credit age, credit utilization, credit inquiries, and credit mix, but it also looks at trended data to identify your credit patterns over the last 24 months. It considers things like whether you pay your credit cards in full or carry balances from month to month, as well as whether you've consolidated debts during this period.

Depending on your score, lenders will then categorize your status as follows:

Borrower Category Score Range
Super Prime 781 – 850
Prime 661 – 780
Nonprime 601 – 660
Subprime 601 – 600
Deep Subprime 300 – 500

Data Source: Experian

Unfortunately, subprime or deep prime borrowers aren't in the best position, as Experian's report paints a bleak picture with these categories hitting record lows for originations.

"The trend of subprime shrinking just continues. You can see over the last three years a much more marked decrease in our subprime originations."

Melinda Zabritski,

Experian's Sr. Director of Automotive Financial Solutions

This is true of car loans for both new and used vehicles.

The question then becomes: how do qualify for an auto loan with a credit score of 600?

1. Know What Your Budget Can Handle

Determining what you can afford allows you to refine your search so that you're not stuck with monthly payments you can't cover. In addition, it can help speed up the process of finding the best financing options. Just be sure to factor in the costs involved in car ownership, such as fuel, auto insurance, maintenance, and other miscellaneous expenses like parking and property tax.

You might find it tempting to extend your loan terms to reduce monthly installments. However, this will only increase what you pay in interest over the agreement period. It also creates a greater risk of becoming upside-down (a.k.a. underwater) on your loan, meaning you'll owe more on your car than it's worth. If you're not sure what you can afford, click the link below to do a calculation:

Auto Loan Calculator

Once you're approved for a car loan, it can help your build credit by adding to your credit mix and payment history.

2. Save for a Larger Down Payment

A substantial down payment is a great way to offset a bad credit score. Most experts recommend a down payment of at least 20% for a new car and 10% for a used one. That's because a new car depreciates by around 20% in the first year alone, while a used vehicle won't depreciate as quickly. But there are other reasons to pay as much as possible upfront.

A large down payment amount can help you:

  • Qualify faster
  • Qualify for a better interest rate by reducing your perceived risk to lenders
  • Decrease your lending term, thereby saving you money you'd otherwise pay in interest in the long run
  • Lower your monthly installment and help you pay off the debt sooner
  • Reduce your loan-to-value (LTV) ratio (i.e., decreasing what you need to borrow against the value of the car, making you a better prospect in the eyes of lenders)
  • Avoid being upside down on your loan

If you have a trade-in, you can apply its value to the down payment you need for the car you're about to purchase. Whatever you do, don't drain your savings or emergency fund for the down payment.

apr written on sheet

3. Shop Around for a Good APR and Loan Terms

As with any big purchase, it's essential to evaluate all available car loan options. Since each lender will view your credit history in a slightly different way, you might find that one credit provider offers better rates than another.

Banks, credit unions, online lenders, finance companies, car dealerships, and buy-here, pay-here (BHPH) dealerships are just some of the lenders you might consider. However, be careful with financing sources like BHPH dealerships since interest rates are likely to be high, and some providers don't report to credit bureaus, which won't benefit your credit score.

What can you expect when comparison shopping? 

Here are the averages for loan amounts, term lengths, annual percentage rates (APR), and installment amounts across all borrower categories for new car loans:

New Car Loan
Borrower Category Average Loan Average Terms (Months) Average APR Average Monthly Payment
Super Prime $33,915 63.94 2.58% $579
Prime $38,896 70.97 3.64% $616
Nonprime $39,310 74.13 6.32% $642
Subprime $35,092 73.5 9.92% $631
Deep Subprime $29,952 72.19 12.99% $587

Data Source: Experian

Here's the data for used car loans:

Used Car Loan
Borrower Category Average Loan Average Terms (Months) Average APR Average Monthly Payment
Super Prime $25,965 64.25 3.68% $439
Prime $27,428 67.75 5.35% $457
Nonprime $26,095 67.77 9.77% $483
Subprime $21,779 64.99 15.91% $486
Deep Subprime $18,319 60.87 19.85% $476

Data Source: Experian

There's no reason you can't find better terms than these averages, but be cautious about applying to too many lenders within a short timeframe. Each hard inquiry on your credit record will reduce your score by up to five points.

4. Have Documented Proof of Your Financial Stability

Even if your credit score is low, showing lenders that you have some stability in other areas of your financial life can go a long way toward reducing your risk factor. Proof of employment or income, tax returns (if you're self-employed), and your lease agreement are great starting points. The reason you'll want to provide your lease agreement is two-fold: 1) you'll need proof of address, and 2) it can help demonstrate stability if you've lived at your current address for a long time.

Additional reading: Credit Score Needed To Lease A Car

5. Enlist a Cosigner

If you think you'll struggle to qualify for a car loan based on your current score, consider asking a family member or friend with better credit to cosign for you. Lenders are more willing to offer you finance and a better APR if you have a cosigner because they view it as two people taking on the responsibility to pay the loan. If you go into default, they can claim payment from your cosigner.

Before taking this route, make sure you have a rock-solid agreement with your cosigner in place and a plan to pay off your car loan quickly. Your loan affects their credit score, so everyone involved should feel comfortable about taking on new debt and committing to payments before signing any contract with the lender.

What if you fall into the deep subprime category?

Can I Get A Car With A 500 Credit Score?

Securing an auto loan with a credit score of 500 is tough but possible. It's going to cost you, though. With the average APR for a new car being 12.99% and the average APR for a used car being19.85%, you'll be paying more than double the APR compared to someone in the nonprime bracket in both instances.

With the five tactics we mentioned above, you can put yourself in a better qualifying position and counter these high-interest rates. However, you should also consider raising your credit score before seeking financial assistance from auto loan lenders.

credit score ranges

What Credit Score Is Needed To Buy A Car Without A Cosigner?

Borrowers with a credit score of 661 and above usually don't need someone to cosign for them. Fortunately, there are auto loan providers that offer financing solutions to those with bad credit and no cosigner.

Since interest rates and loan terms will vary, you'll need to shop around to find the best deal. Don't forget that a significant down payment may also eliminate the need for a cosigner, no matter your credit score.

Final Thoughts

Many people mistakenly believe that you require a fair to good credit score to obtain a car loan. In reality, you can get a loan with just about any rating. The only downside is that the car loan industry can be abusive and predatory, which is why doing your due diligence is so crucial. Otherwise, you could find yourself tied to a loan agreement that might ultimately tank your finances.

Things like building your credit score, having a large down payment, and knowing the average interest rates and terms for loans in your borrower category will strengthen your negotiating power when talking to lenders. Be smart so that you don't get burned by a car loan you can't afford.

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