Recently the president announced a 25% tariff on automobiles and auto parts, meaning the prices of cars will surge across the US. The country imports about half of the automobiles sold and a significant portion of auto parts.
A transportation industry specialist at Cornell University has estimated that once the impact of delayed tariffs on imported parts is considered, they could add $10,000 to $20,000 to the price of a car.
Clearly, anyone looking to buy a car needs all the help they can get. This is where maintaining a high FICO score could save you thousands of dollars on an auto loan. As I explained in my article on credit history last June, your FICO score is three-digit number from 300 to 850, which summarizes a person’s credit risk. You can get your credit score from Equifax, Experian and TransUnion, the three major credit bureaus. The data they use to calculate FICO scores include payment history, amounts owed, length of credit history, new credit, and credit mix.
Banks and other institutions think that the higher your score, the more likely you are to repay your debts on time. Broadly speaking, a score of 670 to 739 is considered good, A score of 740 to 799 is considered very good and a score of 800 to 850 is considered excellent.
According to Experian, the average APR (Annual Percentage Rate, or the total yearly cost of borrowing money, including interest and any other standard fees) for new car loans -based on FICO score is:
781 to 850: 4.77% APR
661 to 780: 6.40% APR
601 to 660: 9.59% APR
501 to 600: 13.08% APR
300 to 500: 15.75% APR
Based on the Experian estimates, if a borrower with excellent credit takes out a $50,000 car loan over five years, they would pay about $938 per month. Meanwhile, a borrower with relatively poor credit would have to pay quite a lot more: around $1,209 per month. A simple difference – a credit score – leads to a significant difference of $300 a month.
If possible, you should prioritize building your credit, because the payoff is worth it in the long run.
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