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Auto Loan Rates Based on Credit Score

How much it costs to finance a $20,000 car, for instance, depends on the APR that you are offered. And your APR, in turn, depends on the current prime interest rate and your credit score. Let’s look at several credit score ranges so that you can get somewhat of an idea of how much interest that you may need to pay.

Auto Finance Rates By Credit Score/Tier

Most lenders use the same credit ratings. They are as follows:

  • Excellent 720 or higher
  • Good 680-719
  • Average 620-679
  • Poor 580-619
  • Bad 500-579

Someone in the excellent category will most likely pay the current prime interest rate which is 3.25 percent for new car loans. Each of the other categories will have percentage points added to the prime rate in order to compensate for the added risk of loaning money to a lower credit score. Below you will find an estimate of the interest rate that each credit rating may pay followed by how many months the average loan will be and how much total interest you will pay:

  • Excellent…3.25 percent…60 months…$1,696.00
  • Good…5.75 percent…60 months…$3,060.10
  • Average…9.25 percent…48 months…$4,003.76
  • Poor…13.00 percent…36 months…$4,259.65
  • Bad…18-24 percent…30 months…$4,983.51 for 18 percent.

Keep in mind, the above numbers are just estimations–not advertisements. Your actual rate could vary widely.

Role of the Down Payment

All of these numbers assume that you financed the entire $20,000. Most lenders like to see that you offer a down payment when you are applying for a car loan. With excellent credit you may not be required to offer one, but with all other credit scores, you will. A credit score in the Good category may only need to offer 10 percent in cash, trade, or a combination of the two. On the other hand, someone who has a credit score that falls into the Bad category will need anywhere between 30 and 50 percent of the total purchase price (price plus taxes and fees) as a down payment.

No matter what your credit score is, it is a good idea to offer at least fifteen percent of the total purchase price down. This helps you save money in total interest paid and will lower your monthly payments.