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:

Approximate monthly payment per $1,000 financed, by loan term
Loan termPer $1,000
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):

Total interest on a $25,000 loan over 60 months, by APR
RateTotal interest
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

  1. 30 days before

    Check your credit

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

  2. 2 weeks before

    Get pre-approved

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

  3. 1 week before

    Research prices

    Use KBB, Edmunds, TrueCar to know fair prices.

  4. Day of

    Negotiate price first

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

  5. After purchase

    Keep making payments

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

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