Auto Loan Rates by Credit Score: What Car Shoppers and Refinancers Should Know

September 4, 2018

Whether you’re buying a new car or refinancing an existing auto loan, it’s always a good idea to shop around for the best auto loan rate. This can put you in a better negotiating position and help you save money over the duration of your loan.

As for the rates you’ll be offered, it entirely depends on your creditworthiness and how much you intend to borrow. Ideally, you want to get the lowest rate possible, but your credit score will determine what “lowest” means for you.

Before taking out an auto loan, it helps to learn the average auto loan rates by credit score so you know what to expect—and when to keep shopping around.

What is a good credit score to get a car loan?

Generally speaking, the higher your credit score is, the better your rate should be. Your credit score helps lenders see your overall financial picture and to determine whether you’ll be likely to make on-time payments and pay back a loan in full. In other words, the higher the credit score, the more likely you’ll be seen as creditworthy.

So what is a good credit score to buy a car? In 2016, Experian reported that buyers had an average VantageScore of 711 for new car loans and 649 for used car loans. However, this only tells us that applications for these credit scores were approved—not what interest rate these applicants received.

What is a good auto loan interest rate?

Let’s look at the average auto loan interest rates by credit score so you can estimate the best rate for your situation.

According to Experian, here are the average car loan interest rates from 2016 (auto refinance loan rates should be similar):
Auto Rates by FICO
Remember, these are just average rates based on one factor: credit score. The actual rate you’ll get depends on the lender and the factors they use to determine rates—for example, the length of your loan, how much you want to borrow and the current value of the car.

Still, knowing the average auto loan rate by credit score gives you a ballpark estimate of what lenders might offer you. You can get your credit score by enrolling in a credit program online, and you’re also entitled to a free credit report every year from the three major credit reporting agencies. This can help you see what could be affecting your credit rating and dispute any information that’s incorrect before you apply for a loan.

Keep in mind that auto lenders may see a different score than what’s listed on the three major credit reporting agencies. Still, it’s a good idea to see how creditworthy you are before shopping around for rates.

Other factors to consider

Aside from interest rates, there are other aspects of an auto loan to consider:

  • While some lenders offer longer loan terms (some up to 7 years), you may not want to drag out your loan for that long. Cars depreciate fast, and you could end up owing more on your loan than your car is worth.
  • The best rates are usually for loans that are shorter. If you can afford it, consider making a higher monthly payment to save money in the long run.
  • You can save time by applying at a loan comparison site. These sites will do a soft pull on your credit, meaning it won’t affect your credit score. You can prequalify for a number of loans at the same time.
  • Some lenders only allow you to work with certain dealerships in your area or limit the type of car you can purchase. It’s best to do your research to see if the vehicle you want can be funded.

Now that you’re armed with information on average credit scores needed for the best auto loan rates, you can shop around with more confidence for your new car loan or auto refinance loan.

Looking to save money or lower payments on your car loan? Check your auto refinance rate in minutes and instantly find out what offers you qualify for.

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