Average Auto Loan Rates in 2020 by Credit Score

August 25, 2020 | by Jacob Hamilton

couple buying car

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Purchasing a car is an exciting milestone in many people’s lives. If you have the cash up front, paying for your vehicle is pretty straightforward. However, if you’re looking to finance your car purchase, you’ll need to review your credit score and loan options before riding off into the sunset.

Auto lenders use your credit score to determine if you’re eligible for a loan, what interest rates will be attached to your loan, the loan terms and the monthly payment amounts. Simply put, the higher your credit score, the better your auto loan rate will be and the less it will cost you to borrow over time.

To purchase a new car, the average credit score needed is 715 with an average auto loan rate of 5.76 percent, according to an Experian report. For those buying a used car, the average credit score is 662, with an average auto loan rate of 9.49 percent.

The average auto loan rates by credit score for a new car:

Deep subprime (300–500): 14.39%

Subprime (501–600): 11.92%

Non-prime (601–660): 7.65%

Prime (661–780): 4.68%

Super Prime (781–850): 3.65%

The average auto loan rates by credit score for a used car:

Deep subprime (300–500): 20.45%

Subprime (501–600): 17.74%

Non-prime (601–660): 11.26%

Prime (661–780): 6.04%

Super Prime (781–850): 4.29%

average auto loan rates

Do All Auto Lenders Use the Same Credit Score?

Credit bureaus offer a wide variety of credit scores to allow borrowers to meet lenders’ needs. Similar to your personal credit score, industry-specific credit scores, like your FICO® Auto Score, are designed for lenders to determine your creditworthiness and eligibility to pay back an auto loan.

FICO Auto Scores are based on a basic FICO Score and are then altered to further predict a person’s likelihood or ability to repay the auto loan on time. Factors that determine your FICO Auto Score may include:

  • Recent bankruptcy including a car loan or lease
  • Credit history
  • Signs of having gone through credit repair
  • Ability to make payments on time
  • Previous repossessions or collections from an auto loan

While a lender will likely consider your FICO Auto Score before revealing your rates, every lender has the freedom to choose which of your credit scores they want to use when evaluating your auto loan application. Each lender will also have different score requirements to determine your auto loan rates.

Unfortunately, you likely won’t know which credit score the lender will review when you apply for an auto loan. That said, it’s important to maintain your financial health in order to establish good creditworthiness across all types of credit scores.

What’s the Minimum Credit Score for a Good Auto Loan Rate?

While there is no universal credit score that will ensure you get a good rate for your car loan, in general, the higher your credit score, the better your interest rates will be. It’s recommended to have a score of 660 or higher when you buy a car, as this will typically guarantee interest rates under six percent. Ultimately, the closer the interest rate is to zero percent, the less money you’ll end up spending to repay the loan.

Alternatively, if you have bad credit, it’s still possible to get an auto loan. According to Experian, in Q1 of 2020, roughly 20 percent of car loans went to borrowers with credit scores below 600, and about three percent of used car loans were given to those with scores below 500.

However, these loan offers come with strings attached. Deep subprime borrowers with scores 449 and below can expect to pay nearly five times the rate of buyers with good credit. Those with very poor credit like this may even be quoted rates of 20 percent higher for either a new or used car loan.

recommended credit score to buy a car

What Credit Score Do I Need for 0% APR on an Auto Loan?

It’s possible to get a car loan with a zero percent annual percentage rate (APR), which means you have no interest added to your loan during your repayment term. Before you get too excited, though, it’s important to know that only people with healthy credit histories and very good or exceptional credit scores will qualify . While a good credit score will get you a lower auto loan rate, a credit score of 740 or higher will put you in the running for a zero percent APR.

If you’ve made a few late payments or have any other negative marks on your credit report, it may take some time for your credit history to bounce back in order to qualify for a zero percent APR auto loan. If you’re set on the benefits and long-term savings of having zero percent APR, consider improving your credit score before purchasing a car.

factors that determine auto loan rates

Ways to Get a Lower Auto Loan Rate

If you don’t qualify for a zero percent APR, you can still secure a good auto loan rate. Credit unions, banks and auto finance companies all offer low-interest loans that you may be eligible for. Before closing the deal on an auto loan, it’s important to browse your options and compare auto rates and terms from different lenders. Repaying your auto loan can be a process, with consumers having an average auto loan term of nearly six years. In that case, you’ll want to make sure you feel confident about who you’re borrowing from and the terms that come with the loan.

Furthermore, if you have a bad credit score and are still having trouble finding a lender that will offer you a rate you’re comfortable with, you may want to consider having a cosigner on your loan application.

If you already have an auto loan, there are a few ways you can lower your current interest rates:

  • Build your credit score
  • Add a cosigner
  • Refinance with lower interest rates or shorter loan terms
  • Negotiate with your lender
  • You don’t need a perfect score to secure an auto loan from a reputable lender, but keep in mind that the better your score, the better your auto loan rates and terms will be—which will cost you less to borrow and save you money in the long run. Alternatively, the lower your score, the more you’ll likely end up paying on your auto loan through interest. If you don’t have the cash to purchase a car up front, or if you have a low credit score, consider working to improve your score before applying for an auto loan.

Jacob Hamilton

Jacob Hamilton

GM of CreditRepair.com

With his master's degree from the University of Phoenix, Jacob has been working as the General Manager for CreditRepair.com for 2 years. Jacob is passionate about consumer finances and doing everything he can to make credit repair accessible....

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