Buying a new car is always an exciting venture. Most people jump right into it and start planning what model, color, and make they want their new vehicle to be. However, there are far more pressing matters that need to be addressed first.
Needless to say, most people don’t even consider the option of paying in cash. After all, a car is an expensive commodity. That’s why a credit score assessment is one of the necessary evils that everyone needs to deal with before going to a car dealership. So here are a few helpful pointers about credit scores.
The average credit score needed to buy a car
Anyone who’s considering buying a car needs to know what average credit score is needed in order to do so. Namely, there are five credit score ranges:
• Deep subprime
The super-prime credit score ranges from 781 to 850.
The prime ranges from 661 to 780.
The non-prime ranges from 601 to 660.
The subprime ranges from 501 to 600.
The deep subprime ranges from 300 to 500.
People who are interested in buying a used car need an average credit score of 655, whereas purchasing a new vehicle requires a credit score of 714.
Car loan rates by credit score
It’s wrong to assume that only people with super-prime, prime and non-prime scores can get a loan. Anyone with a subprime or deep subprime credit score can purchase a vehicle as well; however, there’s a big difference in the loan rate, especially when it comes to buying a new vehicle.
Ultimately, people with a super-prime credit score of 781 and over get incredibly low car loan rates, while a new car loan with a deep subprime credit score may end up costing five times more.
Namely, the average loan rate for a super-prime credit score is 2.6%.
Before you shop
There are several things that can help improve a credit score. First of all, checking credit reports is always a good start. Also, paying every bill on time and keeping credit balances low is a great next step. Lastly, many people tend to get loans for things they don’t really need. That’s a mistake that's easy to fix and will lead to a better credit score.
Yet another important thing that can make all the difference in the world is getting quotes from various lenders. It’s incredible, but even the smallest difference in interest rates can make a huge impact in the long run.
Overall, the topic of credit scores is often a sore subject for most people. However, it’s a crucial factor when it comes to making these types of big purchases. It’s important to remember that a credit score isn’t something that cannot be changed. Furthermore, a person with a lower score shouldn’t get discouraged and decide not to purchase a car.
Nowadays, there are several lenders who offer incredibly low rates, which is obviously great news for people with not-so-enviable credit scores.