A low credit score does not lock you out of a car loan. In the first quarter of 2026, subprime and deep-subprime borrowers together accounted for roughly one in six auto loans, according to Experian’s State of the Automotive Finance Market report. What a low score does is raise the price, sometimes dramatically, and it makes you a target for the worst financing on the lot. The goal is not just to get approved. It is to get approved on terms you can live with, and then to stop paying the bad-credit premium as soon as you can.

What bad credit actually costs

Experian’s first-quarter 2026 data puts the gap in plain numbers. Borrowers in the prime tier (661 to 780 on VantageScore 4.0) averaged about 6.2% on new-car loans and 8.8% on used. Subprime borrowers (501 to 600) averaged roughly 13.4% on new and 19.4% on used; deep subprime (300 to 500) ran about 16% new and 21.8% used. Across all borrowers, the second-quarter 2026 averages were 6.35% for new vehicles and 11.19% for used.

Put those rates on the average used-car loan of the period, about $27,850 over 60 months, and the difference is stark: roughly $575 a month and about $6,650 in total interest at the prime rate, versus about $729 a month and nearly $15,900 in interest at the subprime rate. Same car, same term, more than $9,000 apart. Every step below is about closing that gap.

1. Pull your reports before anyone else does

The old advice was to check your credit report once a year. Since 2023 you can pull it from all three bureaus free every week at AnnualCreditReport.com, so there is no reason to walk into a lender blind. Read the reports for errors and dispute anything wrong. Then look at what is dragging your score down:

  • Collections. Newer scoring models (FICO 9, FICO 10 and VantageScore 3.0 and 4.0) ignore paid collections entirely, and the three bureaus no longer report medical collections under $500. Settling an old collection can help more than it used to.
  • Utilization. Card balances above 30% of your limits pull scores down; paying them toward zero before you apply is the fastest lift available.
  • Recent inquiries. A hard inquiry usually costs fewer than five points and FICO stops counting it after 12 months, so do not let fear of one stop you from shopping. Just do the shopping inside a short window (see step 3).

If the score problem is bigger than a few quick fixes, these three mistakes are usually where to start.

2. Prequalify with a soft pull

Most banks, credit unions and online auto lenders now offer prequalification: a soft inquiry that shows the rate, term and maximum amount you are likely to get without touching your score. It is not a guaranteed approval, but it tells you what your credit is worth before a dealer’s finance office tells you something worse. Credit unions deserve a spot on the list. They held about a fifth of the auto-loan market in the second quarter of 2026, and in Experian’s refinancing data they delivered the largest average savings of any lender type.

3. Shop several lenders inside two weeks

Apply to a handful of lenders and let them compete. FICO treats multiple auto-loan inquiries within a short window as a single event (14 days on older score versions, 45 on newer ones), so a burst of applications costs about the same as one. Then walk into the dealership with a written approval in hand. The Federal Trade Commission is blunt about why: the APR you negotiate with a dealer usually includes an amount that compensates the dealer for arranging the financing. A pre-approval turns the dealer’s offer into something it has to beat rather than something you have to accept. Our guide to getting the best rate on a car loan covers the negotiation itself.

4. Avoid the buy-here-pay-here lot

A buy-here-pay-here dealer is one that both sells the car and originates the loan without selling that loan to a third party, in the Consumer Financial Protection Bureau’s definition. That combination is the problem: the seller sets the price, the rate and the payment schedule, often on older cars, and a dispute ends with a repossession rather than a phone call. Treat it as the last resort, not the first stop.

5. Shrink the loan: down payment, cheaper car, shorter term

With a high rate, every dollar you do not borrow is expensive interest you do not pay. A larger down payment lowers the amount financed, lowers the payment, and keeps you from being underwater the moment you drive off. So does buying a less expensive used car and refusing the dealer’s extended warranty and gap add-on (gap coverage from your own insurer typically runs $20 to $40 a year, versus a $400 to $700 flat dealer charge). Keep the term as short as the payment allows; stretching a subprime loan to 72 or 84 months multiplies the interest, as our companion piece on how long a car loan should be shows.

6. Consider a cosigner, carefully

A cosigner with strong credit can move you a tier or two down the rate ladder. Understand what you are asking. Under the terms the FTC spells out, the cosigner is liable for the full debt plus any late fees and collection costs, the lender can pursue the cosigner without first pursuing you, and the loan lands on the cosigner’s credit report. Missed payments damage both of you.

7. Refinance once your credit has healed

A bad-credit auto loan is a bridge, not a destination. Pay on time, keep card balances low, and check your score every few months. When it has climbed a tier, refinance. In the second quarter of 2026, borrowers who refinanced cut their average rate from 10.40% to 7.97% and saved about $83 a month, per Experian; those who refinanced through a credit union saved about $102. Some lenders want a few months of payment history first, and lenders set vehicle-age limits (Capital One, for one, refinances only vehicles ten model years old or newer), but there is no rule that you must ride out the original loan. The rate you accepted with a subprime score is not the rate you have to keep once you have earned a better one.