Your credit score can significantly impact the interest rate on your car loan, with a good score potentially saving you thousands of dollars over the life of the loan. In 2023, the average new car loan amount was $40,366, which could cost anywhere between $46,419 and $57,339 depending on the interest rate. For used cars, the loan amount averaged $26,685, with total costs ranging from $32,205 to $43,812. Interest rates for new car loans varied drastically from 5.4% for top-tier credit scores to 15.6% for lower scores, while used car loan rates ranged from 6.8% to 21.6%.
To maximize savings, consider choosing less popular or discontinued car models, avoiding unnecessary luxury features, and purchasing older cars without standard backup cameras. Before visiting dealerships, know your credit score and get preapproved for a loan from a bank or credit union to leverage better rates. Making a larger down payment can also reduce your loan amount and interest rate. If your credit score is low, work on improving it by correcting errors on your credit report, paying down high balances, and negotiating with creditors. Finally, remember that refinancing is an option if you initially secure a high-interest loan.
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