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Access to credit is tough for all consumers, but especially for consumers with credit scores of 699 or lower.
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Both new and used car prices remain high, and approvals for subprime borrowers have declined since the first quarter of 2025.
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Pre-tax list prices are falling, and cars manufactured or exported by the Trump administration’s new tax policies are expected to post higher prices.
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Subprime borrowers can still buy a car by looking for used cars, checking with banks or credit unions and considering a private group purchase.
Car sales from April and the first half of May have been down since February and March, but are expected to decrease as existing car prices decrease and new prices affect cars arriving at car dealerships. Although experts agree that tariffs will increase car prices, no one is sure when this increase will happen – mainly because the car market is slow. The actual financial impact may not be clear in the coming months.
At the same time, auto loan delinquency has been on the rise. According to TransUnion, delinquency in the fourth quarter of 2024 rose to 1.47 percent, surpassing the peak in 2009 during the Great Recession. Lenders respond by being more careful about who they extend car loans to. Foreclosures are increasing for those with subprime credit, and interest rates are rising for all borrowers except those with excellent credit.
Unless you need a car in the near future, it may make sense to wait or consider leasing. In the meantime, you can focus on building your credit score to ensure you qualify in what could be a tough market.
The average credit score required to be approved for a new auto loan is also on the rise, according to Experian’s State of the Automotive Finance Market. Interest rates for subprime borrowers have risen while approvals have fallen, leading to a gap in affordable financing.
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Average interest rates on credit score
New car loans
Used car loan
Super prime
4.66%
7.70%
Prime
6.27%
9.98%
Near the beginning
9.57%
14.49%
Subprime
13.17%
19.42%
Deep subprime
16.01%
21.85%
Source: Experian State of the Automotive Market, Q4 2025
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Distribution of loans by credit score
New car loans
Used car loan
Super prime
46.77%
22.78%
Prime
35.33%
35.88%
Near the beginning
11.28%
18.86%
Subprime
6.06%
19.32%
Deep subprime
0.55%
3.15%
Source: Experian State of the Automotive Market, Q4 2025
David Thomas, director of content marketing at CDK Global, says access to auto loans is “influenced by general credit trends.” He notes that access to credit – and credit denials – are at their highest levels in ten years.
Cox Automotive data shows this trend is continuing. April data show that the share of subprime borrowers fell 280 basis points, or 2.8 percent, year-over-year, and those who qualify for low credit could be hit hard if car costs rise sharply.
Auto loan approval rates rose 20 basis points, or 0.2 percent, in May, according to the latest data from Cox Automotive. But while foreclosure rates are rising overall, they’re falling sharply for those with subprime credit.
This is in line with Experian data, which showed that the credit rating of borrowers buying a new car rose from 746 in 2021 to 753 in the fourth quarter of 2025.
Many factors can make lenders wary of borrowers with poor credit. Historically high car prices coupled with high interest rates have made affordability a problem for many buyers. An increasing number of those consumers have opted for long-term loans to offset high rates, even though longer terms are associated with higher delinquency rates. Now, with taxes and inflation looming, many lenders are looking for low-risk borrowers.
A recent report from Santander Bank shows that, in the first quarter of 2025, nearly half of low-income Americans have delayed buying a car in the past year because of cost. That depleted purchasing power was released in April and early May, when demand for cars increased.
The demand pushed the average price of new cars to $48,699, a 2.5 percent increase from March, according to Kelley Blue Book. This was a significant increase from the standard 1.1 percent increase expected from April sales, which are often fueled by tax refunds.
The answer comes from Bankrate: Many experts do not believe that these numbers will last long. Car prices are expected to rise in the coming months as pre-tax car stocks dwindle and new models arrive on car lots.
Meanwhile, the Manheim Used Vehicle Value Index (MUVVI), which tracks the price of used cars, rose 2.7 percent from March to April. This indicates that the price of used cars is increasing, which may explain why sales of used cars have decreased. Due to inventory shortages and growing demand, it seems that the price of used cars will remain close to the price of new cars. For the greatest value – and the manufacturer’s warranty – look to a certified pre-owned vehicle (CPO).
Despite what may sound like an uphill battle, car shoppers can still find ways to get a bad credit car loan and buy an affordable car. Pre-tariff 2024 and 2025 vehicles are still on the lot for now, and buyers can time their purchases during traditional holiday car sales like Memorial Day and Labor Day. And while rates are higher for those with less-than-perfect credit, exploring new financing options is a useful way to find a good deal.
“I would say check out credit unions, look beyond just banks,” advises Sean Tucker, Senior Editor at Kelley Blue Book. Historically, credit unions have been more willing to work with subprime borrowers, and often, credit union auto loans offer some of the lowest interest rates. This is supported by data from Cox Automotive, which revealed that in April credit was mostly available through credit unions.
Another option is a bad credit car loan, but buyers should keep in mind that these loans tend to have higher interest rates and more fees than other car loans. Subprime lenders can expect an interest rate of 13 percent for new car loans and 19 percent for used cars. Those in the deep subprime category fare the worst, and some can face interest rates as high as 21 percent. Meanwhile, interest rates on car loans are likely to remain high, further fueling the lack of affordable options in the car market.
Tucker also advises buying a used car privately. “Private party purchases are always cheaper than off-the-shelf.” Buying privately doesn’t always require you to have car finance, either, as private company car loans are available from select lenders. However, lenders impose similar eligibility requirements, so it may be difficult for a subprime buyer to qualify for a private equity loan.
As always, consumers will benefit most by paying off debts, finding unpaid debts and focusing on credit rebuilding. This process takes time, so while it may not be the fastest way to go, it is an important step towards accessing lower interest rate credit in the future. By building your credit score, you may be able to qualify for more competitive rates in the future, regardless of how the auto industry changes.
The current car market is not good for buying for several reasons, especially for those with low credit scores or no credit history. However there are still options for those who need auto financing. Credit unions and buying from private companies may be the right course for an affordable car payment, but it doesn’t hurt to build credit and wait for the market. The auto industry plans years in advance, so a few tough months won’t lead to a bleak, unattainable future for autos.
