Buying a car requires understanding credit scores and their impact on loan terms. About 71% of car loans go to borrowers with credit scores of 661 or higher, according to Experian's third-quarter 2024 report.

While there's no universal minimum credit score requirement for car loans, your score significantly affects interest rates and terms. Here's what you can expect based on your credit score range:

Average Auto Loan Interest Rates (Q3 2024):

• Superprime (781-850): 5.08% new, 7.41% used
• Prime (661-780): 6.70% new, 9.63% used
• Nonprime (601-660): 9.73% new, 14.07% used
• Subprime (501-600): 13.00% new, 18.95% used
• Deep subprime (300-500): 15.43% new, 21.55% used

Impact on Monthly Payments: For a $20,000 five-year used-car loan with no down payment:

• Good credit (700s): ~$421 monthly, $5,278 total interest
• Poor credit (500s): ~$518 monthly, $11,095 total interest

FICO Auto Score: Dealers often use a specialized FICO Auto Score (250-900 range) that weighs past car-loan payments more heavily than traditional credit scores.

Tips for Buying with Bad Credit:

1. Make a larger down payment
2. Provide proof of financial stability (pay stubs, proof of address)
3. Compare financing options from multiple lenders
4. Consider getting preapproved before visiting dealerships

Building Credit Before Car Shopping:

• Pay all bills on time
• Keep credit card balances low
• Avoid new credit applications for six months
• Maintain existing credit accounts

Benefits of Car Loans on Credit:

• Improves payment history
• Diversifies credit mix
• Builds long-term credit history through regular payments

Remember: While lower credit scores don't necessarily prevent you from getting a car loan, they can significantly increase your borrowing costs. Consider improving your credit score before making a purchase if possible.

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