Most car shoppers understand that their credit score directly influences what interest rate they’ll pay on their car loan. The higher your credit score is, the less money you’ll pay in interest. If you have bad credit, you’ll pay a higher interest rate and you’ll pay more to borrow that money over the life of the auto loan.
According to Experian Automotive’s third quarter 2009 analysis, car buyers with the best credit, considered super prime (740 and higher) by Experian Automotive, received an average auto loan rate of 4.8% for new vehicles. Prime car loan shoppers (680-739) paid an average APR of 6.24%. Nonprime (620-679) car buyers received an average auto loan rate of 8.16%, while subprime (550-619) buyers received an average rate of 11.42%. Deep subprime car loan shoppers (550 or less) paid the highest interest rates, at an average of 14%.
If you’re looking at used vehicles, you’ll pay a higher interest rate than a new vehicle. In the third quarter of 2009, super prime shoppers paid an average of 6.54%, while prime consumers paid 8.32%. Nonprime shoppers received an average rate of 10.64% for their used car loans. Getting into subprime and deep subprime, the interest rates jumped much higher. Car shoppers with subprime credit scores paid 14.24%, while deep subprime buyers paid 16.25%.
With lenders still cautious right now due to the uncertain economy, you’ll need either a good credit score or a substantial down payment to get approved. The average credit score for new car loans in the third quarter of 2009 was 775. Used car loans had an average credit score of 684.
While auto loan approvals are based on a number of different circumstances, if your credit score falls into the nonprime, subprime or deep subprime categories, you should be prepared to pay a higher interest rate if you want to get approved for a car loan. You can also wait several months to apply for the auto loan and improve your credit score to get a better interest rate.
Experian Automotive’s fourth quarter 2009 analysis data is expected to come out soon. Car shoppers can then see if the average auto loan rates have increased or decreased recently.