It's usually easier to secure a loan for a new car than a used car because lenders can more easily determine the value of a new car.
Better interest rates: With a new car purchase, you are also more likely to get a better interest rate on an auto loan than you would with a used car purchase, often by a few percentage points. Reliability: You won't have to contend with any potential hidden mechanical problems when you buy new.
Financing for Older Cars Can Be Harder to Get
If your car is repossessed and no longer functions or holds its predicted value, your lender may end up with a loss on your loan. To help offset these factors, used cars can have higher interest rates, according to data and analytics company Equifax.
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.
For most buyers in 2024, new car deals are more sensible due to lower financing costs and attractive incentives. Used car prices are declining but remain high, affected by the pandemic's long-term impact on production.
Kelley Blue Book analysts expect 2024 to be a stable, predictable year for car shoppers, barring any unexpected disruptions to global trade.
With vehicle supply and financing options likely to improve, Cox concludes that "2024 will be the best year for car buyers since the pandemic."
What Is the Minimum Score Needed to Buy a Car? In general, lenders look for borrowers in the prime range or better, so you will need a score of 661 or higher to qualify for most conventional car loans.
Auto dealerships use the FICO credit bureau, which stands for Fair Isaac Corporation. They also use the FICO Auto Credit Score, which has a range of 250 to 900. This may mean that an auto dealer has a different credit score for you than the one you see on your personal credit report.
There is no set minimum FICO® Score to get a car loan. However, a good score at 720 or better will get you the best rate. Consider spending some time improving your credit score before shopping for your next car. Even moving up a few points can make a big difference if you have a low score.
Build credit and reapply
With poor credit, car shoppers won't qualify for the best auto loan rates and it's harder to get approved for a loan at all. The average new car loan rate was 7% in the third quarter, up from 5.2% a year ago, according to a Nov. 30 report from Experian.
NerdWallet recommends financing new cars for no more than 60 months and used cars for no more than 36 months. These maximums can help you avoid some of the negative outcomes of long-term loans.
The best time to buy a car has several answers. Your best bet is to buy between October and January 1st. December is particularly ripe for deals, discounts, rebates and other incentives as well. This is because car salespeople are aggressively working to meet their monthly, quarterly and yearly quotas.
What is considered high mileage on a car? Often, 100,000 miles is considered a cut-off point for used cars because older vehicles often start requiring more expensive and frequent maintenance when mileage exceeds 100,000.
In addition to certain times of the week or holidays, some months are better to buy or lease new vehicles or purchase used cars than other months. In general, May, October, November and December are the best months to visit the car dealership.
What credit score is needed to buy a car without a cosigner? People with prime credit scores of 661 or higher likely don't need an auto loan cosigner.
To buy a $50,000 car and get favorable auto loan options, it's best to have a credit score in the prime or super prime categories. Prime borrowers are those with a credit score within the 661-780 range, while super-prime borrowers fall within the 781-850 range.
A rule of thumb for down payments on new car loans is 20% of the purchase price, which helps you avoid owing more on the loan than the car is worth.
If your credit score isn't good, however, you're typically required to make a down payment of at least $1,000 or 10% of the vehicle's selling price. This varies by lender, and some may accept the lesser amount. On a $20,000 car, that would be up to $2,000 down.
However, the monthly cost of a $20,000 car loan will generally depend on your repayment period and the annual percentage rate (APR). Assuming that you take out a 48-month loan at an average APR of 4.09%, you would pay $452 monthly.
Cox Automotive Chief Economist Jonathan Smoke says 2024 will be the best year for consumers to buy a new car since before the pandemic, as new vehicle supply increases, transaction prices come down, automakers are expected to offer more deals and interest rates should ease.
Used car prices may continue to fall, but a more likely scenario is prices holding steady in early 2024. Waiting too long could result in even higher interest rates, adding insult to injury as rates already average well north of 13% APR.
How long should you keep a car? A typical car is expected to last 200,000 miles or more, with electric or hybrid vehicles going up to 300,000 miles. If you drive the average number of miles for an American, a typical car should last you about 14 years and an electric car will last about 21 years.