If you’re in the market for a new car, you may be wondering how your credit score affects your ability to get a good deal. The truth is, having good credit can save you thousands of dollars on your next car purchase. In this article, we’ll explore just how much you can save on your next car if you have good credit.
First, let’s define what we mean by “good credit.”
Credit scores typically range from 300 to 850, with higher scores indicating better credit. A score of 700 or above is generally considered to be “good” credit, while scores above 800 are considered “excellent.”
So, how much can you save on your next car with good credit? The answer depends on several factors, including the price of the car, the length of the loan, and the interest rate you’re able to secure.
Let’s start with the price of the car.
If you’re shopping for a new car, you may be looking at vehicles with price tags of $20,000, $30,000, or even $40,000 or more. With a higher credit score, you may be able to negotiate a lower price on the car. This is because dealerships may be more willing to work with customers who have good credit, knowing that they are less of a risk for defaulting on the loan. In some cases, having good credit may also make you eligible for special financing offers or discounts on the price of the car.
Next, let’s look at the length of the loan.
When you finance a car, you’ll typically have the option to choose the length of the loan, typically ranging from 36 to 72 months. With good credit, you may be able to qualify for a shorter loan term, which can save you money in interest charges over the life of the loan. For example, if you were to finance a $30,000 car with a 72-month loan at a 4% interest rate, you would pay $4,801 in interest charges over the life of the loan. However, if you were able to qualify for a 48-month loan at the same interest rate, you would only pay $3,201 in interest charges – a savings of $1,600.
Finally, let’s consider the interest rate you’re able to secure.
Interest rates on car loans can vary widely depending on your credit score, the length of the loan, and the lender you choose. With good credit, you may be able to qualify for a lower interest rate, which can significantly reduce the amount you’ll pay in interest charges over the life of the loan. For example, if you were to finance a $25,000 car with a 60-month loan at a 6% interest rate, you would pay $4,789 in interest charges over the life of the loan. However, if you were able to qualify for a 3% interest rate on the same loan, you would only pay $1,666 in interest charges – a savings of $3,123.
In summary, having good credit can save you thousands of dollars on your next car purchase. By negotiating a lower price on the car, choosing a shorter loan term, and securing a lower interest rate, you can significantly reduce the amount you’ll pay in interest charges and overall cost of the vehicle.
But what if you don’t have good credit?
If your credit score is below 700, you may still be able to get a car loan, but you may have to pay a higher interest rate and potentially have a longer loan term. This can result in significantly higher interest charges over the life of the loan and a higher overall cost for the car.
