There’s no doubt that buying a car is expensive. The average price of a
new car is more than $36,000, and a used car costs more than $20,000 on
average. However, for many buyers, a car’s price doesn’t tell the entire
story about what it costs to buy it. Because most people take out a
loan to buy a car, the interest rate on their auto loan drives the final
cost of the car up. In fact, an auto loan’s interest rate is usually
the second most expensive part of buying a car. If you can get a good
auto loan interest rate, you can save thousands. To get more
auto finance news, you can visit shine news official website.
A score of 750 points or higher is considered excellent credit. These
borrowers are seen as having a very low risk by lenders, so they get
charged less interest. If your credit score is in this range, you may
qualify for financing incentives and loan deals offered by auto makers.
These car deals can have financing as low as zero percent, potentially
saving you thousands.
Lenders consider people with a score in the range of 700 to 749 to be a
fairly low risk. However, while people in this range would generally get
charged below-average interest rates from banks, credit unions, and
other lenders, they are unlikely to qualify for zero-percent financing
offers from car companies.
When your credit score is in the 600s, it starts to get expensive to
borrow money. On the bright side, the rates for car loan refinancing are
still relatively low for these borrowers. That means if you purchase a
car with a high interest rate, you can refinance and save money once
you’ve built up some equity.
People with poor credit are known as subprime borrowers. Lenders see
people with subprime credit as being at a higher risk for not paying a
loan back. As a result, lenders charge these borrowers higher interest
rates to protect against loss. Some lenders won’t even work with
borrowers in this credit range. Learn more about how to buy a car with
bad credit.
Deep subprime borrowers will likely have a hard time finding a lender
for a car loan, and when they do, they will pay extremely high interest
rates. These high interest rates can add thousands of dollars to the
overall price of a car and make monthly car payments extremely
high.Let’s look at the different auto loan rates above and see how they
impact your bottom line. We’ll use a loan term of five years and a
new-car loan amount of $28,800 (which is the amount left to finance
after a 20% down payment on the average price of a new car at $36,000).
Using the average interest rate for people with top-notch credit, 5.32%,
that works out to $2,257 in interest payments. People with good credit
and an interest rate of 6.02% will pay a bit more, with interest on the
loan amounting to $4,495. When the rate goes up to 11.4% for people with
fair credit, total interest payments also go up, hitting $8,863. At
16.46%, the average new-car interest rate we found for people with poor
credit, the total interest comes to $13,266. That’s more than a third of
the car’s purchase price of $36,000 and about $9,500 in added costs
compared to what someone with excellent credit would pay.
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