Can I Buy a Car With a 650 Credit Score?

Having a credit score of 650 may make getting approved for an auto loan more challenging, but it is still possible with the right strategy This article will explain in detail what a 650 credit score means, how lenders view it, what loan terms you can expect, and most importantly, the steps you need to take to get approved for a car loan with a 650 credit score

What Does a 650 Credit Score Mean?

Credit scores range from 300 to 850. 650 falls right in the middle which is considered a fair or average score by most lenders. It is below the range for “good” credit which starts at 670 or higher. While a 650 credit score shows some past credit mistakes, it doesn’t raise huge red flags for lenders either. You can generally still qualify for financing but may pay higher interest rates than borrowers with good or excellent credit.

Is 650 a Low Credit Score for an Auto Loan?

For auto loans, a credit score below 620 is usually considered a subprime score by lenders. So 650 is on the low end of what most mainstream lenders look for but isn’t quite subprime yet.

According to Experian data, the average credit score for a used car loan is 684, while the average for a new car loan is 756. So 650 falls well below those averages. However, 15.64% of auto loans still go to borrowers with credit scores between 601 and 650. So while 650 is below average, plenty of people with this score do get approved for car loans.

Expected Interest Rates for a 650 Credit Score

The interest rate you’ll pay on a car loan depends heavily on your credit score. According to Experian, here are the average rates you can expect with a 650 credit score:

• New car loan: 9.83%
• Used car loan: 13.74%

To compare, buyers with good credit in the low 700s typically see average rates around:

• New car loan: 6.70%
• Used car loan: 9.06%

So interest rates for 650 credit score borrowers are significantly higher. Using a car loan calculator shows how much more interest you’ll pay over the life of the loan with a higher rate.

For example, on a $20,000 5-year used car loan:

• 9.06% rate: $415 monthly payment, $4,945 total interest
• 13.74% rate: $519 monthly payment, $11,122 total interest

As you can see, the higher interest rate costs over twice as much in interest charges. This is why improving your credit before applying for a car loan can save you thousands.

Auto Loan Terms to Expect with a 650 Credit Score

In addition to higher rates, a credit score of 650 will also impact the loan terms lenders offer. Here are some common terms for 650 credit borrowers:

• Down payment required – Most lenders will require 10-20% down with a 650 score. This helps offset the higher risk.

• Shorter loan term – Loans may max out at 5 years instead of 6 which leads to higher monthly payments.

• Prepayment penalty – Some lenders charge this fee if you pay off the loan early to ensure they earn enough interest.

• Higher fees – You may encounter lender fees of $500+ compared to minimal fees for excellent credit borrowers.

• Co-signer required – Some lenders will only approve loans for 650 credit applicants if they have a co-signer with better credit.

Strategies for Getting Approved with a 650 Credit Score

Getting approved for an auto loan with less-than-stellar credit takes strategy. Here are some tips to boost your chances:

• Shop lenders that work with your credit range – This includes buy here, pay here dealers, credit unions, and online lenders that specialize in bad credit. Mainstream lenders likely won’t approve 650 credit scores.

• Increase your down payment – Putting down 20% or more shows lenders you’re committed to repaying the loan and lowers risk. Even an extra few hundred can help.

• Pre-qualify first – Submitting applications that result in hard inquiries before you’re likely to be approved further dings your credit. Pre-qualify instead.

• Bring proof of income and residency – Lenders want to see stability in other areas of your finances. Bring recent pay stubs, tax returns, and utility bills.

• Enlist a co-signer – Adding someone with better credit improves the chances of approval. But co-signers are also responsible for the loan if you can’t pay.

• Improve your credit first – Waiting 6+ months to improve your score even marginally can get far better loan terms. Pay down balances and dispute errors.

Takeaway: Approval is Possible with a 650 Credit Score

A credit score of 650 makes getting a car loan more difficult and expensive due to higher rates and stricter terms from lenders. But with the right strategy, it is possible to get approved. Applying with less-than-ideal credit requires patience, planning, and being willing to accept loan offers that aren’t perfect. But in the end, if you need reliable transportation, a 650 credit score loan could be your best option, as long as you shop smart.