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Americans currently owe over $1.4 trillion in auto loans.
Kevork Djansezian/Getty Images
A good credit score to buy a car is often above 660, as you’re then considered a “prime” borrower.
There’s no industry-wide, official minimum credit score in order to qualify for an auto loan.
Generally, the higher your credit score, the better terms you’re likely to get on the loan.
Americans are borrowing more money than ever to buy cars.
The average loan amount, not including interest, topped $41,000 for a new car and just under $28,000 for a used car in the fourth quarter of 2022, according to credit-reporting agency Experian. In total, Americans owe over $1.417 trillion on their auto loans, up by 8.6% since this time last year.
These numbers may be less shocking when you consider the barrier to entry isn’t incredibly high. While a good FICO credit score to buy a car with a loan is usually above 660, according to Experian data, there’s no industry-wide, official minimum. Over 30% of the $1.4 trillion in auto debt is held by borrowers with credit scores below 660.
As with most other types of loans, the higher the borrower’s credit score, the easier it is to get a loan. You’ll also secure better loan terms. But it’s still possible to get an auto loan with a traditionally low credit score.
What are the different credit score tiers you can fall into?
According to Experian’s analysis of auto loans in the fourth quarter of 2022, borrowers who received financing for a new car had an average credit score of 738, while borrowers who received financing for a used car had an average credit score of 678.
In its analysis of auto loans, Experian separates current auto loan borrowers into five categories based on credit scores:
Nonprime (near prime)
Borrowers in the subprime and deep subprime categories represent 15.6% of all borrowers in the auto-loan market, according to Experian. Meanwhile, borrowers in the top two categories, super prime and prime, represent 66.5% of all …read more
Source:: Business Insider