What Credit Score Is Needed to Buy a New or Used Honda?
For most people looking to buy a new car, affordability is a significant factor in the decision. Auto loans help car shoppers afford a new or used Honda that fits their needs. However, the interest rates of the auto loan vary based on your credit score and other personal financial factors.
What kind of interest rate will you receive based on your credit score? In general, you'll receive a lower interest rate if you have a high credit score. Conversely, if you have a low credit score, you'll likely have a high-interest rate, as lenders will see you as less trustworthy in repaying the loan.
For car shoppers looking to determine estimated monthly loan payments, you'll need to take a look at your credit score. We'll go over the average interest rates for different credit score rankings. We'll also explain some ways to boost your credit score before you go car shopping to get a better interest rate.
Interest Rates Based on Your Credit Score
The interest rates of an auto loan will vary based on the individual dealership, as they set the prices. However, dealership financing is usually competitive, so you'll find that average interest rates are usually similar to dealership rates. The average interest rates based on your credit score ranking are:
- 781-850 (superprime): If you fall between these numbers, you'll likely get the best interest rates. For a new model, you might expect a 4.75% APR. For a used vehicle, the rate will be slightly higher with an approximate APR of 5.99%.
- 661-780 (prime): For car shoppers who fall into the prime credit score rating, you'll receive slightly higher interest rates than those who have superprime credit score ratings. With this kind of credit score for a new car, the average APR rating is around 5.99%. A used car's average APR is about 7.83%.
- 601-660 (nonprime): For this credit score range, you might get an APR of about 8% for a new car. For a used car, the APR will be around 12%.
- 501-600 (subprime): With poor credit like this range, you'll likely have to pay high-interest rates. The average APR rate for a new car is around 11%. For a used car, the APR rate will be around 17-18%.
- 300-500 (deep subprime): With this range, you'll have to pay extremely high-interest rates, as lenders will see you as a risk. The average APR for a new car within this range is around 13-14%. A used car within this range has an APR of about 20-21%.
Many lenders prefer to give out loans to people who fall into the prime or superprime ranges. However, there may be options for people with lower credit scores.
A credit score is a way for lenders to know if you are reliable enough to repay your loan. Credit scores range from 300 to 850. If you are at the high end of this range (781 or above), you are considered a good candidate for a loan. Therefore, you have a lower interest rate compared to other borrowers who don't have as high a credit score.
Auto loans can have expensive interest rates if you have a low credit score. If you're trying to reduce your auto loan interest rate, you might want to consider additional considerations that might factor into your interest rate. Though your credit score for a new car is the main determiner in securing a reasonable interest rate, there are a couple of other factors you should consider as well.
For example, the down payment may affect your interest rate. If you're willing to pay more upfront on the down payment, you'll lower your loan term. A higher down payment means you will pay less interest throughout the lifetime of the loan.
You should also consider buying a new vs. used car. Though a used car may have a low price tag, it typically has a much higher APR than a new vehicle. Your credit score for a new car will carry you farther than if you opt for a used car, so you may want to consider purchasing a new Honda.
Credit scores typically require a few months to see positive changes. If you have enough time before you need to shop for a car, you might consider ways to improve your credit score to secure a better interest rate. One of the best ways to improve your credit score is to catch up on any outstanding debts. You should also be sure to keep good credit habits, such as paying bills on time and only utilizing less than 30% of your credit limit.
Your credit score will be a determining factor in the interest rate of your auto loan. If you're looking to buy a new or used Honda, you should be aware that interest rates for new cars are generally lower than used ones. If you're on the fence about whether you want to buy a new or used Honda, you might want to closely consider the interest rates. Your credit score for a new car will go a lot farther than with a used car. However, the price of a used car is often a lot lower than new models. If you would like to see what kind of car you can afford and the types of rates you qualify for, we offer pre-approval for an auto loan at our dealership.