Are you planning to purchase a new car in 2023? Then it’s important to first learn what auto loan rates by credit score are and how they’ve changed recently — as well as how auto financing is expected to change. To prepare for 2023, here’s a rundown of what you need to know about interest rates based on credit score and how they affect auto loans.
Understanding Auto Loan Rates by Credit Score
To understand auto loan rates by credit score, let’s quickly review what they actually mean. Car loans let individuals purchase a new vehicle by borrowing the necessary money from an auto lender, which must be paid back to them over a period of time. The borrowing cost is called the annual percentage rate (APR), which is a combination of any applicable fees along with the interest rate of the car loan.
This interest rate determines how much money you will have to pay the lender at each installment, and there are many factors that can influence its rate. For example, whether or not the vehicle is new or used and how much down payment you’re putting on it can alter your interest rate. The rate can even fluctuate based on the lender, with some having different maximum rates than others. However, more often than not, the interest rate is largely based on credit score. Lenders do not want to risk losing money by lending it to someone unreliable and, as a result, will compensate by charging them a higher interest rate.
This means that you can get a higher interest rate — and pay more money for your auto loan — if there are missed payments, records of bankruptcy, and other problems on your credit report. Using too much of your available credit can hinder your credit score as well. Thankfully, there are several tricks you can try to obtain a better auto loan rate by credit score. For example, making a larger down payment can result in lower monthly payments. In addition, some lenders provide lower interest rates for new cars, so consider picking them over a used one.
Auto Loans by Credit Score in 2023
2022 will have a large influence on what auto loan rates by credit score will be like in 2023, so let’s review the previous year for some context. Because of continued supply chain issues throughout 2022, there were fewer vehicles available for purchase on the market. This naturally resulted in higher prices. In conjunction with supply chain problems, there was also the matter of the federal government increasing interest rates numerous times. As this made the cost to borrow increase, financing a car became more difficult.
Auto loan rates by credit score will continue to change as we enter 2023. Supply chain issues are posed to improve over time, and vehicle prices will decline as a result. However, interest rates are expected to continue increasing as well. Therefore, anticipate spending more to finance vehicles. Because of these higher rates, individuals with bad credit scores will experience the brunt of the rising rates.
Call Quality Credit Repair For Assistance
Given how interest rates based on credit score can influence car financing can be, improving your score can help make paying for cars easier. At Quality Credit Repair, you can count on our debt consolidation consultants and other credit score experts for professional assistance. To learn more about our credit repair in Philadelphia, reach out to us for further information.