Yes, you can likely get a $40k car loan with a 600 credit score, but expect much higher interest rates and stricter terms because 600 is considered "fair" or subprime, and higher loan amounts mean more risk for lenders. Your success depends on income, lender, and if you can offer a large down payment or find a cosigner with good credit, but shopping around and comparing pre-qualified offers is crucial.
Can You Get a Car Loan with a 600 Credit Score? Absolutely. A credit score of 600 falls within the “fair” category, which means there are still many financing options available. However, you should be prepared for higher interest rates compared to someone with good or excellent credit.
For a $40k car, aim for a 20% down payment ($8,000) for a new car to avoid being "upside down," or 10% ($4,000) for a used one, but put down as much as you comfortably can to lower monthly payments and interest, even if it's less than recommended, especially if your credit is strong. A larger down payment improves loan terms and reduces risk, but if you have good credit, you might get approved with less, though it increases your risk of owing more than the car's worth.
As a general rule, you should pay 20 percent of the price of the vehicle as a down payment. That's because vehicles lose value, or depreciate, rapidly. If you make a small down payment or no down payment, you can end up owing more on your auto loan than your car or SUV is worth.
Dave Ramsey's core car buying rule is to pay cash for a reliable used car, avoiding debt and new car depreciation; he suggests only buying new if you're a millionaire, and generally, the total value of all your vehicles shouldn't exceed 50% of your annual income. His philosophy emphasizes buying what you can afford outright, viewing cars as depreciating assets that shouldn't trap you in debt.
There's no minimum credit score required to get an auto loan. However, a credit score of 661 or above—considered a prime VantageScore® credit score—will generally improve your chances of getting approved with favorable terms.
Loan options with a 600 credit score
Many lenders offer $40,000 loans, including local banks, credit unions, online lenders and peer-to-peer lenders. To qualify, you'll likely need a good or excellent credit score and healthy finances, or a cosigner who meets these criteria.
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
For a $40k car, aim for a 20% down payment ($8,000) for a new car to avoid being "upside down," or 10% ($4,000) for a used one, but put down as much as you comfortably can to lower monthly payments and interest, even if it's less than recommended, especially if your credit is strong. A larger down payment improves loan terms and reduces risk, but if you have good credit, you might get approved with less, though it increases your risk of owing more than the car's worth.
Rates and terms are subject to change without notice. Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
A lease on a $45,000 car typically costs $400 to $700+ per month, depending heavily on your down payment, lease term (36 months is common), mileage allowance, the car's residual value (what it's worth at the end), and the money factor (interest rate). For example, with a good credit score and modest down payment on a 36-month term, payments might start around $450-$500, but with more money down or a lower residual, you could see closer to $300-$400 monthly, while less down or higher fees push it up.
While there's no set amount of income needed to buy a car, a good rule of thumb is to keep your monthly transportation costs, including your car payment, at or under 10% to 15% of your monthly net income.
For under $40k, you can find a wide range of new cars, including efficient sedans like the Honda Civic or Toyota Corolla Hybrid, popular SUVs like the Kia Sportage, Ford Bronco Sport, or Subaru Forester, exciting sports cars such as the Subaru BRZ/Toyota GR86 or Hyundai Elantra N, and even some trucks like the Ford Maverick Hybrid, offering great options for various needs from daily driving to performance.
It may be easier to secure a loan for a new car than it is for a used car, and new car loans often come with lower interest rates. Used cars can be a good fit if you're on a budget and they generally cost less to insure; however, interest rates for used car loans are often higher than for new car loans.
Yes, you can get a car loan with a 600 credit score, as it falls into the "fair" or "subprime" category, but expect higher interest rates and potentially stricter terms, so shopping around, getting pre-approved, and considering a larger down payment or cosigner are good strategies. Lenders see scores above 600 as a starting point, but a score of 600 may lead to rates around 13-19% for new/used cars compared to much lower rates for prime borrowers.