4 tips for getting a low interest rate on a car loan



Consumers with low credit scores are often concerned about getting a high interest rate on their auto loans. It’s true that your credit score is a big part of the rates you can get for financing a vehicle, but there are ways to increase your chances of getting a lower interest rate.

Negotiating the interest rate on your car loan

When you’re preparing for a car loan and your credit score isn’t that good, you might have to expect to pay more in interest charges. Lenders usually charge more interest for borrowers with poor credit scores, but we have a few tips for trying to get a low rate.

1. Know your credit situation

We’re not just talking about knowing your triple-digit credit score – we want to know what rates other borrowers are getting with scores similar to yours. According to Experian State of the automotive finance market Compared to the last quarter of 2020, the borrower’s average interest rates by credit score are:

Credit score

Average rate for new cars

Average used car rate

Super prime (781-850)



Premier (661-780)



Not prime (601-660)



Subprime (501-600)



Deep subprime (300-500)



These are only averages, but can serve as a baseline for the interest rates you can expect from a lender and the start of negotiations.

If you don’t know what’s on your credit reports, visit www.AnnualCreditReport.com to request your three free credit reports from national credit bureaus. It’s free weekly access until April 2022 due to the financial stress of the pandemic, so make the most of it while you can!

2. Consider a new or newer car.

You may have noticed in the average rates that new cars get a lower interest rate than used cars. This is because used vehicles with high mileage, normal wear and tear, and expired manufacturer warranties have a higher risk of mechanical failure.

Auto lenders care about the condition of the car and its price. Additionally, since newer vehicles tend to be more expensive, borrowers are more likely to choose a longer loan term, so lenders may be more likely to negotiate a lower rate given the longer term. long. Used cars, in comparison, tend to have lower loan balances, so lenders can try to offset this with a higher interest rate.

It may be a good idea to choose a newer or certified pre-owned vehicle to have a chance of getting a lower rate. While buying a clunker might be cheap now, you can pay more interest and possible repairs in the long run. For bad credit borrowers, it’s a dance between reliability, affordability and cost.

3. Have a big deposit

When your credit is low, a lender’s biggest concern may be your ability to repay the loan successfully. Since they may see you as “higher risk”, a high interest rate may be possible. However, by facing a large down payment, you are telling the lender that you are able and willing to invest in your own success and reduce your risk as a borrower. This is called skin in the game. Research has shown that borrowers who put money on their auto loans have a higher success rate.

Typically, bad credit auto lenders require a down payment anyway, usually at least $ 1,000 or 10% of the vehicle’s selling price. You can deposit as much as you want, and the trade-in value also counts as a down payment.

4. Bring a co-signer

If you have a co-signer, they allow you to borrow their good credit to help you get approved for a car loan and possibly qualify for a lower rate than if you had to apply on your own.

The co-signers also agree to repay the loan if you are unable to do so, which increases the chances of completing the loan successfully. Borrowers with poor credit scores may be asked to have a co-signer in order to qualify, even more so if they are applying to traditional auto lenders from banks or credit unions. Even though a co-signer is not required for you to qualify for a car loan, it could still increase the chances of getting a lower rate on your car loan.

Start the search for a dealer

All of this preparation is great in theory, but if you can’t find an auto lender who can work with your credit situation, then it’s all for naught. Here has Auto Express Credit, we want to help you along your car buying journey by connecting you with a special financial dealership who knows how to help you with unique credit circumstances.

To get started, fill out our simple and free auto loan application form. We will look for a dealer in your area, and there is never any obligation, so what are you waiting for?


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