Approximately 15% of auto loan applications are currently rejected, with rates climbing to over 1 in 10, marking a significant increase in recent years due to tightened lending standards, high interest rates, and elevated consumer debt. Rejections are highest among subprime borrowers, though average perceived rejection rates have reached nearly 33.5%.
More than 15% of auto loan applicants are rejected. Use these tips to get approved. New data from the Federal Reserve Bank of New York found that auto loan approval rates are dropping for U.S. buyers. Of those who applied for auto loans in October 2025, 15.2% — or more than 1 in 10 — were rejected.
Auto lenders can set their own requirements for borrowers and may deny your car loan application for many reasons—from your credit score to the amount of debt you're carrying.
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. For the FICO® Score Θ , a good credit score is 670 or higher.
To qualify for a car, you generally need a minimum gross monthly income of $1,500-$2,500, but lenders focus more on your Debt-to-Income (DTI) ratio, aiming for total monthly debts (including the car payment) to be under 36-43% of your gross income, while keeping total car costs (payment, insurance, gas) under 15-20% of your take-home pay. Your credit score, down payment, loan terms, and the car's price also significantly impact approval and rates.
Most lenders look for a minimum gross monthly income of $1,500 to $2,000 for a car loan, but this varies by lender, with some requiring as little as $1,800 while others go up to $2,500, often depending on your credit and debt-to-income ratio (DTI). Your ability to repay is key, so lenders assess your income against existing bills, preferring a DTI (total monthly debt/gross income) under 45-50%, and often want to see a single source of stable, taxable income, though larger down payments or cosigners can help with lower incomes.
Credit reports showing late payments, collections, or significant derogatory events—such as bankruptcies or foreclosures—can signal financial mismanagement and complicate underwriting.
They may be less likely to approve you for car finance if your report includes things like late payments, county court judgments or bankruptcy. A hard search will be recorded on your report, meaning other lenders can see it when you apply for credit.
The 20/3/8 rule is a car-buying guideline suggesting you put 20% down, finance for 3 years or less, and keep your total monthly car expenses to 8% or less of your gross income, helping to ensure you buy reliable transportation without overspending and can still invest in other goals like retirement. It's a tool to avoid being "underwater" on your loan (owing more than the car's worth) and to prioritize financial health over luxury vehicles.
An auto lender considers several factors – including your credit score, your credit history, income, debts, and down payment – when deciding what interest rate to offer you. Auto lenders will generally consider a number of factors when they're determining the interest rate and loan terms to offer you.
With a 700 credit score (considered "Good"), you're well-positioned to get approved for most major loans like mortgages, auto loans, and personal loans with more competitive interest rates and terms than someone with a lower score, plus you'll qualify for better rewards credit cards and may even see lower insurance premiums. You can access a wide range of financial products, but to get the best rates, scores above 740-760 are often needed.
Highlights: Even a single late or missed payment may impact credit reports and credit scores. Late payments generally won't end up on your credit reports for at least 30 days after you miss the payment. Late fees may quickly be applied after the payment due date.
If you have a good credit history, steady income, and a stable job, your chances of approval may be higher. However, if you've had money problems in the past, your income isn't enough to cover the loan, your job situation is uncertain or you have a poorer credit score, you might face more challenges.
Poor credit score is the No. 1 reason auto loan lenders deny an application. A low credit score is considered to be anything that is 620 or lower. Lenders that loan money assess risk and borrowers with poor credit scores are among the riskiest; thus, many of their applications are not approved.
Car dealers may perform a soft inquiry without a shopper's permission or, in some instances, knowledge because they don't affect your credit score. However, a car dealer can't perform a hard inquiry without your written consent because a hard pull will diminish your credit score.
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.
Absolutely! It might be easier to finance a used vehicle with bad credit, but purchasing a new car is definitely also possible. A larger down payment and choosing a model within a reasonable price range can greatly improve your chances of approval.