If you’re buying a car with a 13% interest rate, chances are it’s because you have bad credit or a thin credit history. Whether or not this is a good rate may depend on your credit history and payment history. A high interest rate like this could significantly increase your costs when buying a new car or truck.
Buying a car with bad credit may require special financing and working with a dealer who can help consumers with subprime credit. In some cases, captive lenders may offer financing rates such as 13% APR when considering the relative risk of lending to someone at a higher risk of defaulting on an auto loan.
According to a bulletin from Honda Financial Services, buyers with a FICO score ranging from 610 to 619 are defined as having Level 13 credit which may carry an APR of 13.75% for 72 months. This is the brand’s standard rate for new cars, and opting for a Certified Pre-Owned vehicle can result in a rate of 13.40%.
However, rates may vary by region, length of loan, and whether or not the dealer adds a markup. Some manufacturers offer special incentives for subprime borrowers. Taking advantage of these offers could help car buyers save money considering the high cost of a 13% interest rate on a loan.
For example, a $25,000 car would cost just over $36,000 based on a 6-year loan at 13% APR. This represents approximately $11,000 in interest paid over 6 years. We recommend that you explore all of your options based on your available credit before making a decision as there may be better deals available.
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