Auto Loan Cheat Sheet

Everything you need to know about car financing in one place. Save this page or print it before your next dealership visit.

Credit Score Tiers & Typical Rates

750+Excellent
Best rates available
Typical APR: 3.5% - 5.5%
$$$
700-749Good
Competitive rates
Typical APR: 5.5% - 8%
$$
650-699Fair
Higher rates, still approved
Typical APR: 8% - 13%
$
550-649Subprime
Approval possible with conditions
Typical APR: 13% - 20%
<550Poor
May need co-signer or large down payment
Typical APR: 20%+ or Buy Here Pay Here

The 20% Rule (Dealer Secret)

Keep your credit card utilization between 10-20% of your limit, not at 0% and not maxed out.

0%
Shows no activity
Score impact: Neutral to negative
10-20%
Optimal range
Score impact: Positive
30%+
Too high
Score impact: Negative
Learn more about the 20% rule

DO

  • Get pre-approved before visiting the dealer
  • Know your credit score beforehand
  • Shop rates within a 14-day window (counts as 1 inquiry)
  • Negotiate the total price, not monthly payment
  • Read all paperwork before signing
  • Consider a shorter loan term (36-48 months)
  • Make a down payment of at least 10-20%
  • Check your credit report for errors first

DON'T

  • Focus only on the monthly payment amount
  • Accept the first rate offered
  • Finance for more than 60 months
  • Buy add-ons without researching prices
  • Pay off credit cards to 0% before applying
  • Open new credit accounts before buying
  • Skip reading the fine print
  • Let the dealer run credit multiple times over weeks

Quick Math Reference

Rule of Thumb Payments

For every $1,000 financed at typical rates:

36 months (3 years)~$30/month
48 months (4 years)~$23/month
60 months (5 years)~$19/month
72 months (6 years)~$16/month

Interest Cost Example

$25,000 loan at different rates (60 months):

5% APR$3,307 interest
10% APR$6,873 interest
15% APR$10,748 interest

*That's a $7,441 difference between 5% and 15%!

Key Terms to Know

APR:Annual Percentage Rate - the yearly cost of your loan including fees
LTV:Loan-to-Value ratio - loan amount divided by car value
DTI:Debt-to-Income ratio - your monthly debts vs income
GAP Insurance:Covers the difference if car is totaled and you owe more than it's worth
Residual Value:What the car is expected to be worth at lease end
Cap Cost:Capitalized cost - the negotiated price in a lease
Money Factor:Lease interest rate (multiply by 2400 to get APR)
Buyout:Amount to purchase your leased vehicle
View full glossary

Car Buying Timeline

30 days before
Check your credit

Get free reports from AnnualCreditReport.com. Dispute any errors.

2 weeks before
Get pre-approved

Apply at your bank, credit union, and 1-2 online lenders.

1 week before
Research prices

Use KBB, Edmunds, TrueCar to know fair prices.

Day of
Negotiate price first

Get the out-the-door price before discussing financing.

After purchase
Keep making payments

Set up autopay. Consider extra payments to save on interest.

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