You can get a car with a bad credit score, but it could cost $10,000 more. Up to $10,000 might be saved on a car by having good credit. That’s how much a poor grade can cost you.
The average loan amount for a new car in 2023 was $40,366. However, according to an estimate by the personal finance website MarketWatch Guides, the total cost of the loan might vary from $46,419 to $57,339 depending on the interest rate.
Your vehicle loan interest rate is mostly determined by your credit score. In addition, interest rates are rising.
The mean loan amount for used cars was $26,685. However, when interest is taken into account, the whole cost of that loan might range from $32,205 to $43,812.
Auto loan interest rates are at their highest point in years. According to Experian, the average rate on a new automobile varies from 5.4% for people with the best credit ratings to 15.6% for people with the worst credit.
Depending on your credit score, the typical interest rate for used autos can range from 6.8% to an astounding 21.6%.
For a car loan, what constitutes a good credit score?
A car loan can even be obtained by a customer with bad credit. However, the loan will most likely have an exorbitant interest rate, which will significantly raise the total cost of the vehicle.
“You could pay thousands of dollars less if you have a low interest rate than if you have a high interest rate,” NerdWallet personal finance expert Kimberly Palmer stated.
A complex calculation is shown in the large variation in auto loan interest rates. Automobile lenders consider you to be a higher risk if your credit score is lower. Additionally, an automobile is a decreasing asset because, on average, its value decreases with each year that goes by.
“The risk that the lender is taking on to loan you money for an asset that is depreciating is priced in by the interest rate,” according to Palmer.
The good news is that there are more cars on the road than there were a few years ago. Although high, prices are not rising. A new car typically costs $49,000, whereas a secondhand car often costs $29,000.
Palmer added, “It’s a really competitive one: the car-loan industry.” Lenders desire your patronage. Here are some money-saving suggestions for your upcoming vehicle.
There are several attractive models. Some aren’t. Seek for vehicles “that people aren’t buying as much,” advised Autotrader and Kelley Blue Book executive editor Brian Moody.
He stated, “There was a car called the Acura ILX that was discontinued.” “Acura ILXs are great cars, but most people aren’t looking for them online.”
Cars that are less-loved are frequently discounted. Search for less well-known brands, sedans, and discontinued models.