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Q: I am interested in buying a car from a dealership, and need a car loan in order to afford it. What credit score do I need to be approved for this kind of loan?
A: The credit score required varies widely from dealer to dealer and depending on what sort of car you are purchasing, so you may qualify for a car at one dealer and be turned down at another. You probably won’t qualify anywhere if you have a bad credit score (mid 500s and below), but above that you should be able to qualify for a basic car, depending on where you look.
If you are wanting to buy a luxury car such as a BMW, the requirements are higher. Depending on the price, dealers may require that your credit score be in the 700s or above. And always remember that your interest rate will vary depending on your credit score.
What do you do if you don’t qualify? If you already have a good car, continue to use it as long as you can and save up what you would have spent on the car payments. Put this in a separate savings account so you won’t touch it and label it in your mind “new car.”
If your car is about to break down, you should also save up to either repair it or to buy a cheap new car. Around $4,000 should get you one that isn’t getting ready to fall apart. You can buy one for less, but if you buy too cheap it will probably be on its last leg just like your current car. If you don’t have a car, consider public transportation or a scooter until you can afford your new car.