Financing Used Car

Financing a used car doesn’t have to be a difficult process. There are a number of factors that contribute to whether or not a lender will approve you and what interest rate you’ll receive.

Credit Score

Your credit history and credit score are the number one determining factors when it comes to financing new and used vehicles. A new car loan is a loan with high principal, usually more than $20,000. While it is possible to receive new car financing without good credit, having good credit is the surest path to approval.

Your credit score should be over 700. Over 750 would be better. If you’re looking to lease a vehicle you’ll need a credit score of at least 750. If your credit score is below 700 you’ll probably be limited to used car financing. If your score is between 600 and 700 you’ll probably be able to qualify for a used car loan. If your credit score is below 600 you will be very limited in regard to approvals.


You need a job. You need to be able to show that you can repay the loan. If you’re self-employed, you’ll almost certainly be required to show two years of tax returns. Very few lenders will accept less than two years of returns.

Debt Ratio

Your debt ratio is your monthly debt divided by your monthly net income. Only debt that is on your credit report is considered. For example, if you have $350 in monthly credit card debt, monthly student loan debt of $150, and a mortgage of $800, your monthly debt is $1,300. If you gross $3,000 per month and net $2,100 per month, your debt ratio is 62% ($1,300/$2,100).

Very few lenders will approve you for a car loan if you have a debt ratio of 50% or higher. Pay down your credit cards or other loans if possible before applying for the loan.


New car financing requires a high credit score and debt ratio of less than 50%. If you don’t fit these two criteria you most likely won’t qualify for a new car loan. A used car loan is more easily obtainable if you have less than perfect (even bad) credit.

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