What is a good credit score to buy a car? The borrowers with the best rates are above 660

Kevork Djansezian/Getty ImagesA good credit score to buy a car is usually above 660, which is considered ‘prime’ by Experian.
  • A good credit score to buy a car is usually above 660, which is the minimum score to be considered a “prime” borrower by Experian.
  • However, there’s no industry-wide, official minimum credit score in order to qualify for an auto loan.
  • Generally, the higher your credit score, the better terms you’re likely to get on the loan.
  • According to an Experian analysis of auto loans in the first quarter of 2019, borrowers who received financing for a new car had an average credit score of 716, while borrowers who received financing for a used car had an average score of 657.
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Americans are borrowing more money than ever to buy cars.

The average loan amount, not including interest, topped $US32,000 for a new car and $US20,000 for a used car in the first quarter of 2019, according to credit-reporting agency Experian. In total, Americans owe over $US1.18 trillion on their auto loans.

These numbers may be less shocking when you consider the barrier to entry isn’t incredibly high. While a good credit score to buy a car with a loan is usually above 660, according to Experian data, there’s no industry-wide, official minimum.

As with most other types of loans, the higher the borrower’s credit score, the better the loan terms. But, it’s still possible to get an auto loan with a traditionally low credit score.

What is a good credit score to buy a car?

According to Experian’s analysis of auto loans in the first quarter of 2019, borrowers who received financing for a new car had an average credit score of 716, while borrowers who received financing for a used car had an average credit score of 657.

In its analysis of auto loans, Experian separates current auto-loan borrowers into five categories based on credit scores:

  • Super prime (781-850)
  • Prime (661-780)
  • Nonprime (601-660)
  • Subprime (501-600)
  • Deep subprime (300-500)

Borrowers in the subprime and deep subprime categories represent just under 19% of all borrowers in the auto-loan market, according to Experian. Meanwhile, borrowers in the top two categories, super prime and prime, represent about 63% of all borrowers.

Generally, the higher the credit score, the lower the interest rate. According to Experian’s first quarter data, the average interest rates on a new car loan for each category of borrower were as follows:

  • Super prime (781-850) – 4.20%
  • Prime (661-780) – 5.12%
  • Nonprime (601-660) – 8.08%
  • Subprime (501-600) – 12.42%
  • Deep subprime (300-500) – 14.97%

Interest rates tend to be even higher for used car loans, reaching 17.52% for subprime borrowers and 20.24% for deep subprime borrowers.

Some auto lenders may also require a cosigner for those with lower credit scores. A cosigner is somebody with established credit who legally agrees to take responsibility of paying back the loan if the primary borrower fails to do so.

Some auto lenders may use a specific credit-scoring model

When deciding whether to extend a loan, auto lenders may use a specific Fair Issac Corporation (FICO) credit-scoring model called the FICO Auto Score. The FICO Auto Score is a variation on the general scoring model, designed specifically to predict the risk of a borrower defaulting on car payments. It ranges from 250 to 900, according to Experian.

Many auto lenders will consider more than a credit score, though. A borrower’s debt-to-income ratio, full credit history, and down payment amount will also affect the terms of the loan.

Related coverage from How to Do Everything: Money

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