Conversely, a shorter term, like 36 or 48 months, usually comes with a lower rate and saves you thousands in interest, but requires a higher monthly payment. Used Vehicle Rates The distinction between new and used car loans is a significant factor in determining your interest rate.
Car Loan Pre Approval 700 Credit Score Guide: Understanding Rates and Terms
While a 700 score qualifies you for these deals, it is crucial to compare the dealer offer with rates from your bank or credit union to ensure you are getting the true market average. While this score unlocks access to competitive rates, the exact percentage you are offered depends on a combination of factors including the prime rate, the term of the loan, and the specific policies of the lender.
New vehicles depreciate more slowly and are generally seen as less risky by lenders, which often results in a lower interest rate compared to a used model. While a longer term, such as 72 or 84 months, reduces the monthly payment, it often increases the average car loan interest rate slightly and results in paying more interest overall.
Car Loan Pre Approval 700 Credit Score Guide: Understanding Rates and Terms
However, a high score is only one piece of the puzzle, as the lender also evaluates your debt-to-income ratio and the loan-to-value ratio of the vehicle. Before visiting a dealership, you should check your credit report for any errors and review your budget to determine how much you can comfortably allocate toward a monthly payment.
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