Lenders go through cycles in lending. During those cycles the ease of getting a car loan waxes and wanes with the economy. Having said that, the ease of getting a car loan depends largely on you and your credit. Here are a few things that lenders consider before approving/declining an auto loan.
The first thing that a lender will do is pull your credit report and score from FICO. FICO builds a score based on five categories: payment history, amounts owed, length of credit history, new credit, and types of credit. With a car loan, FICO builds a special score that is weighted on your use of previous installment loans, specifically auto loans.
For People with Good Credit
If your score is above 700 and you have a long history of paying car loans on time, then you will have an easy time getting a car loan, no matter how the economy is doing. You should be able to get financed through a bank or a credit union, or even qualify for low-rate specials through your dealer finance department.
For People with Bad Credit
On the other hand, if you have a score in the 600’s and/or a history full of late payments or repossession, you may have to jump through hoops in order to get a car loan even during the best economic conditions and within the loosest lending structures. That said, it typically doesn’t get too difficult to get approved until you have a credit score of below 600. Even then, if you have a history of late payments or repossessions, there are still some lenders who are willing to give a person with bad credit a second chance at financing. The main issue you will face is an elevated interest rate, which can, of course, make your vehicle cost thousands of extra dollars over the course of the 2-6 years you spend paying it off. You will also need to work with a subprime auto lender, typically with a loan arranged through the dealership or online, as most banks and even credit unions don’t often lend to people with bad credit.