Auto Loan Resources - Tips and Advice on Taking Out Auto Loans | Bankrate.com (2024)

FAQs

What's most important when taking out a car loan? ›

Every automobile loan comes with different rates of interest. Always choose a loan with a low-interest rate to avoid pinching your pocket. Pay attention to the long-term cost of the loan amount with the total interest payment to know you can afford the entire repayment of the auto loan.

Most used auto loans go to borrowers with minimum credit scores of at least 675. For new auto loans, most borrowers have scores of around 730. The minimum credit score needed for a new car may be around 600, but those with excellent credit often get lower rates and lower monthly payments.

Interest rate, or APR.

APR sounds complex, but the most important thing is that the higher it is, the more you pay over time. Consider a $30,000 car loan for five years with an interest rate of 6%—you pay a total of $34,799 for the vehicle. That same loan with a rate of 9% means you pay $37,365 for the car.

Look at the Terms or Length of the Loan

The term of your loan (how long you have to pay it back) is a very important factor. Short-term loans might seem like they save you money in interest but often come with high fees that are easily outweighed by interest savings.

Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.

The score range for the Auto Score is 250-900 (instead of the traditional 300-850). FICO promotes that Auto Score will help dealerships and lending institutions in five distinct ways: Increase regulatory compliance.

If you're applying at a financial institution where your income is regularly deposited, they will most likely have what they need, as well. But it's best to assume that you'll need to back up what you listed for income on your application. Very simply, a tax return or paystub will do the trick.

How many pay stubs do I need for a car? ›

Last two recent pay stubs (if you have more than one job, bring the stubs from those as well) Proof of residency (any current utility bill should do, such as water or electric) List of references (not including anyone living in your household)

Three major factors that determine your monthly car loan payment are your loan amount, the interest rate and the loan term.

Most drivers do not know that the most important parts of any car are its tires. The tires have an enormous influence on the safety and performance of an automobile.

Car Loan APRs by Credit Score

Excellent (750 - 850): 2.96 percent for new, 3.68 percent for used. Good (700 - 749): 4.03 percent for new, 5.53 percent for used. Fair (650 - 699): 6.75 percent for new, 10.33 percent for used. Poor (450 - 649): 12.84 percent for new, 20.43 percent for used.

The APR you receive will be based on several factors, with the most important being your credit history and credit score. Loan term: The length of time you have to pay off the loan. Auto loan terms are usually in 12-month increments, with the most common at 24, 36, 48, 60, 72 and 84 months.

The latest numbers from Cox Automotive show just how expensive car loans have become. The average new car interest rate is now 9.95%. One year ago, this figure stood at 7%. Step back to 2021, and the average new car loan APR was around 5%.