Many Americans are dreaming of buying a new car, but they are unsure if their credit score will allow them to get the financing for the car they need. Today, we will take a closer look at your credit score and if it is enough to buy the car you want.
How Does My Credit Score Affect Car Financing?
Americans who want to get car financing will need a good credit score, otherwise you might be refused for car financing altogether. However, higher credit scores also have an impact on your financing, because the higher your credit score, the better the rates you might get!
Related: How He Raised His Credit Score from 546 to 720 in 4 Months
What Is the Average Car Finance Loan Amount Obtained in the US?
The average loan obtained for the purchase of a new car was determined on $32,022 in the third quarter of 2016. Compared to 2015, this amount has increased by 4%. Of course, the loan amount varied for used vehicles, which was determined at $19,227 with a growth rate of 2% compared to 2015.
What Is the Average Credit Score I Need to Get Car Financing?
Your credit score can have an influence on your ability to get a used car or a new car. Naturally, you will require the highest score for a new car.
Looking at the numbers for 2016, the average credit score that was required to buy a new car was determined on 714. If you wanted to buy a used car in 2016, you would have needed a credit score of 655.
Can I Still Get Car Financing If I Don’t Meet the Average Credit Score?
Not reaching the average credit score for car financing does reduce the chances of you obtaining the financing you need to buy a new car. However, there might still be loans available to you.
Looking back at 2016, some Americans who applied with a score of 600 and below could still acquire their financing. However, this only applied to 23% of Americans who applied for financing with a credit score below 600.
Naturally, if you have a higher than average credit score, you chances of car financing increases drastically. Of course, this is still no absolute guarantee that you will be approved by your lender.
What Loan Rates Could I Get with My Credit Score?
As mentioned earlier, your loan rate will depend on how good your credit score is (among other factors). For example, if you have a credit score between 781 and 850, you will get a 2.6% rate on a new car loan. It’s a 3.4% rate on a used car loan. If you still have a decent credit score of 661 to 780, you could get a new car loan with a rate of 3.59% and a used car loan of 5.12%. Naturally, these are averages, so the rates you get will vary on the lender and your exact credit score.
Of course, Americans who have a below average credit score, let’s say between 300 to 500, will have to deal with a much higher loan rate. On average in 2016, Americans applying with a credit score between 300 and 500 received a new car loan rate of 13.53% and used car loan rate of 18.98. So, having a good credit score is extremely important in more ways than one!