subject: How Interest Rates Are Determined For Car Loans [print this page] How interest rates are determined for car loans is the same way they decide whether to approve you for an application at all--they look at the level of risk you represent.
There are a large number of factors they take into consideration and once they have a big picture with all of these pieces they decide how likely it is that you will make your payments on time each month. If they decide the risk is too great they won't approve you at all. If they decide there is a good chance they will offer you financing, but you'll have to pay a higher rate because they're taking more of a chance on you. If you are in an excellent financial situation they will offer you the lowest they have because they are sure they'll be getting all their money back and want to compete for your business.
Some of the factors lenders will look at include, of course, your credit score and history, your current income, how long you've been with the employer, and any debt you're currently paying on, whether you have anything to offer for a down payment on the vehicle. If you're in a bad financial situation they will also consider a cosigner on the loan, and then they will look at all of these factors in them. If you fail to make a monthly payment this person will become responsible for the payments so they need to see if they'll be able to really make the payments for you.
After taking all of these factors into consideration they will decide whether to offer you financing, and they will offer you for a deal. The best scores, usually over 680, will get the best deals, while those below 600 will have a difficult time finding financing at all, let alone something affordable. If you feel you're not in a bad situation and are offered a bad deal you don't have to take it, every lender considers things differently and you may be able to find something better elsewhere.
