The Difference is in the Interest Rates
Many car dealers will work with buyers who have a range of credit scores, from those with strong scores in the 700’s to less-established scores below 600. While some dealers may have a minimum score that you must meet in order to qualify for a loan, most will be willing to work with you even if your score is low. However, those with low scores may have to pay a premium the way of a higher interest rate in order to secure a loan.
There are no hard and fast rules in regard to what interest rate you will receive because it varies from dealer to dealer. However, if your score is above 700, you should generally be eligible for the best rates that a dealership has to offer. Should you find yourself buying car with a credit score well into the 700’s, you should know that you are bargaining from a position of strength. If the dealer won’t give you a rate that you are happy with, be prepared to move on to another lot until you get a good deal.
A credit score in the 600’s means that you shouldn’t have much trouble qualifying for a loan, but your rate will likely be higher. For example, if the dealer is able to offer rates around 3%
to those with a credit score over 700, those in the 600’s may get a rate around 5%. Knowing that. you may need to adjust your overall budget down to account for the increased interest that you will have to pay.
Finally, those with a score under 600 are going to have to usually accept a high interest rate in order to secure a car loan. Often, rates for buyers in this category will reach as much as 10% and beyond. While that might seem like a high price to pay, there is an upside – the opportunity to rebuild your credit. With a score under 600, you probably have some credit problems in your past. To get your score to climb, you need to start establishing a pattern of on-time payments. A car loan will give you the opportunity to do just that, even if you have to pay a high rate.
There is no one single answer to the question of what credit score is needed to buy a car. Instead, it is a matter of which dealership you are going to work with, and what kind of interest rate you will be able to secure. Know your credit score going into the process, and make sure you are comfortable with the terms of the loan before you agree to the deal.