Your credit score plays a crucial role in many areas of your financial life—but one of the biggest impacts it has is on your car loan interest rate. Whether you’re buying a brand-new car or a used vehicle, lenders will look at your credit score to determine how much of a risk you are—and that risk directly influences how much interest you’ll pay over the life of your loan.
In this guide, we’ll break down exactly how your credit score affects your car loan interest rate, show examples by score range, and offer tips on how to improve your score before you apply.
What Is a Car Loan Interest Rate?
A car loan interest rate is the percentage you pay your lender in addition to repaying the loan principal (the amount borrowed). This rate can be fixed or variable, and it’s expressed as an annual percentage rate (APR).
How Interest Rates Work
- Lower interest rates mean lower monthly payments and less paid over time.
- Higher interest rates mean more expensive loans and longer-term debt.
Your interest rate depends on several factors—but your credit score is one of the most influential.
How Credit Scores Are Used in Auto Lending
Lenders use your credit score to assess your creditworthiness—how likely you are to repay the loan. The most commonly used score in auto lending is the FICO Auto Score, which ranges from 250 to 900, but many lenders also use your traditional FICO Score (300 to 850).
Why Credit Scores Matter to Lenders
- A high score shows a history of responsible borrowing and on-time payments.
- A low score may indicate missed payments, high credit usage, or delinquencies.
The higher your score, the more favorable the loan terms you’re offered—because you’re considered less risky to lend to.
Average Car Loan Interest Rates by Credit Score (2024 Data)
Here’s a look at the average auto loan interest rates by credit score in 2024, based on Experian data:
| Credit Score Range | New Car APR | Used Car APR |
|---|---|---|
| 781–850 (Super Prime) | 5.2% | 6.5% |
| 661–780 (Prime) | 6.6% | 8.4% |
| 601–660 (Non-Prime) | 9.5% | 13.5% |
| 501–600 (Subprime) | 12.9% | 19.8% |
| 300–500 (Deep Subprime) | 14.9%+ | 21%+ |
Note: Rates can vary by lender, loan term, and location.
How a High Credit Score Saves You Money on a Car Loan
A better credit score doesn’t just increase your approval chances—it saves you thousands of dollars in interest over time.
Example: Cost of a $25,000 Car Loan Over 60 Months
| Credit Score | APR | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 780+ | 5.2% | $474 | $3,422 |
| 660 | 9.5% | $526 | $6,560 |
| 580 | 13.5% | $578 | $9,680 |
| 500 | 21% | $676 | $15,571 |
As you can see, the difference in total cost between a top-tier and low-tier credit score can exceed $12,000.
What Lenders Look For Beyond Your Credit Score
Although your credit score is a key factor, it’s not the only thing auto lenders review.
1. Debt-to-Income Ratio (DTI)
Your DTI compares your monthly debt payments to your income. A lower ratio is more favorable.
2. Loan-to-Value Ratio (LTV)
This measures how much of the car’s value you’re borrowing. Lenders prefer loans that are not for the full value of the car—meaning a down payment helps.
3. Employment and Income Stability
Lenders want to see consistent income, typically over the past 1–2 years.
Can You Get a Car Loan With Bad Credit?
Yes, you can get a car loan with bad credit—but expect higher interest rates, more down payment requirements, and possibly the need for a co-signer.
Tips for Buying a Car with Poor Credit
- Consider a used vehicle to reduce the loan amount.
- Save for a larger down payment to lower your risk to the lender.
- Get pre-approved to understand what interest rates you qualify for.
- Avoid “buy here, pay here” dealers—they often charge extremely high rates.
How to Improve Your Credit Score Before Applying for a Car Loan
Raising your credit score—even by 20–50 points—can make a huge difference in the interest rate you’re offered.
1. Pay Down Credit Cards
Keep credit utilization below 30%, or even better, below 10%.
2. Make All Payments On Time
Your payment history is the biggest factor in your credit score.
3. Dispute Any Credit Report Errors
Get free reports from all three bureaus at AnnualCreditReport.com, and dispute inaccuracies.
4. Avoid New Credit Applications
New inquiries can slightly reduce your score and may concern lenders.
Should You Get Pre-Approved for a Car Loan?
Yes—getting pre-approved before visiting a dealership gives you leverage and helps avoid dealer markups.
Benefits of Pre-Approval
- Know your interest rate in advance
- Understand your budget
- Avoid high-pressure upsells at the dealership
Shop around with multiple lenders—credit unions, banks, and online lenders—to compare rates and terms.
Final Thoughts: Smart Borrowing Starts With Your Credit
Your credit score can make or break your car buying experience. From the rate you’re offered to your monthly payments, the difference between a “prime” and “subprime” rate can cost you thousands.
✅ Quick Recap:
- 780+ scores qualify for the best auto loan rates (5–6% or lower)
- 620–660 scores can still get loans, but at much higher rates
- Below 600 means higher payments and more loan restrictions
- Improve your credit before applying for the best deals
Want to boost your credit before buying a car? I can help you create a plan to raise your score fast and save money on your next auto loan. Drop your questions below or reach out for personalized credit advice!
