Our Financing Options at Liberty Motors Pleasantville

At Liberty Motors, we understand that not everyone has perfect credit. That’s why we partner with Credit Acceptance Corporation (CAC) — one of the nation’s leading subprime auto lenders — to offer flexible financing solutions that feel like traditional Buy Here Pay Here, but with the strength and experience of a specialized finance company.

How Our Financing Works:

• Fast Approvals — Many customers are approved in under 30 seconds using CAC’s CAPS system.
• Bad Credit Friendly — We help customers with low credit scores, past repossessions, bankruptcies, no credit, and more.
• Focus on You — CAC looks at your income and ability to pay, not just your credit score.
• In-House Experience — Our team walks you through the entire process from start to finish.
• Flexible Terms — Competitive rates and payment plans tailored to your budget.

The Approval Process is Simple:

1. Apply online or in person (5–10 minutes)
2. Provide proof of income and ID
3. Get a fast decision through CAC
4. Choose your vehicle and drive home the same day

We proudly offer Credit Acceptance financing so you can get behind the wheel even if other dealers or banks have said no.

Ready to see what you qualify for? 📞 Call or Text: (609) 380-0013 We’ll give you a no-obligation pre-approval in minutes!

Understanding the CAPS System – Credit Acceptance Approval Process

At Liberty Motors Pleasantville, we proudly offer financing through Credit Acceptance Corporation (CAC) using their advanced CAPS System (Credit Approval Processing System).

This system is designed to help customers with bad credit, no credit, or past credit challenges get approved quickly — often in under 30 seconds.

How the CAPS System Works

The CAPS System is Credit Acceptance’s smart approval software. Instead of focusing only on your credit score like traditional banks, it looks at your overall ability to repay the loan. Here’s what they evaluate:

Key Factors CAPS Considers:

• Income & Ability to Pay Verifiable monthly income (pay stubs, bank statements, SSI, self-employment, etc.) is the most important factor. They want to make sure your car payment comfortably fits your budget.
• Down Payment The more you put down (cash or trade-in), the better your chances and the better your terms.
• The Vehicle Age, mileage, and condition matter. Reliable, late-model cars with reasonable mileage are easier to finance.
• Credit History CAC is very understanding. They commonly approve customers with:
  • Low credit scores
  • Past repossessions
  • Bankruptcies (open or discharged)
  • Medical collections or charge-offs
• Stability Time at your current job and residence shows reliability (6+ months is helpful, but not always required).

Real-World Approval Examples at Liberty Motors

• Strong Approval: $2,800 monthly income + $1,000 down → Usually approved same day on a late-model vehicle.
• Challenging Situation: Recent bankruptcy + $800 down → Frequently approved with proper documentation.
• Tougher Case: Lower income + multiple past issues → Often still possible with a higher down payment or more affordable vehicle.

Why Customers Love Financing Through CAC at Liberty Motors

• Extremely fast approvals
• High approval rate for customers who have steady income
• No bank involvement — decisions made quickly
• Flexible options even when other dealers say “No”

Ready to See If You’re Approved?

✅ Get Pre-Approved in Minutes! Call or text us right now at (609) 380-0013

Our friendly team (Pat & Mike) will walk you through the process and help you find a vehicle and payment that works for your budget.

Liberty Motors Pleasantville — Credit for Everyone. No Credit? No Problem!

The Traditional Auto Loan Approval Process Explained

Documentation

Before you apply for to a lender on line, on the telephone, or in person, collect all of your financial documentation. Documents most lenders will need to see prior to any auto loan approval include copies of your pay stubs that record your year-to-date earnings. If you don’t have pay stubs, then you’ll need other proof of income (such as cancelled checks), along with approximately 4 months of bank statements. If you are in business for yourself, you will need to bring along copies of the past 2 year’s tax returns. Lenders will also want to see that you have a checking account, and what’s in it.

If you have additional income – for instance, if you receive spousal support, rental income, or have received an inheritance – it could benefit you to include proof with your other supporting documents. Records of additional income isn’t a requirement, but it could help you obtain better terms, a higher loan, or save you time by helping to expedite the auto loan approval process.

Understand Your Credit History

Get a copy of your credit history from one of the three companies mandated by law to provide credit histories free of charge once a year to consumers (Equifax, Experian and TransUnion). Familiarize yourself with the contents of your credit report in advance, and be prepared to discuss any errors or delinquencies with your prospective lender. Dispute any errors on the credit report before seeking auto loan approval from a lender.

Proof of Residence

The easiest way to document proof of residence is with a copy of a phone bill for a land line. If you don’t have a land line, then your cell phone bill should be addressed to your place of residence. The finance company needs to verify that you live where you say you live, and any proof of residence must report the same residential address you put on your loan application. If you don’t have phone bills that can document your residence, other business correspondence addressed to you at home can be an acceptable substitute.

Finally, if your credit score isn’t good enough to get auto loan approval on terms you can afford, or if your income doesn’t qualify you for the loan amount you need, you might consider finding a co-signer. A qualified co-signer will make you a better loan risk and qualify you for auto loan approval where you were unable to meet the requirements on your own.

What monthly payment can I afford?

When purchasing a new or used vehicle, it is important to not overextend yourself financially. One of the most effective ways to raise low credit scores is to make monthly payments on time. Experts suggest that you should not allocate more than 20% of your take-home pay toward monthly auto payments. The down payment, interest rate, and term of your loan will also determine how much you can afford to spend on an automobile.

As a general rule of thumb, divide your monthly income by 2 to determine your disposable income. Let’s say you make $3,000 per month. Your disposable income would be $1,500. From that, you would deduct any monthly payments you currently have. The number left over should give you an estimate of how much you can afford per month.

	CURRENT	REVISED
Monthly Take-Home Pay	$______________________	$______________________
Saving	-$_____________________	-$_____________________
MONTHLY EXPENSES
Mortgage Payment/Rent	-$_____________________	-$_____________________
Utilities	-$_____________________	-$_____________________
Food	-$_____________________	-$_____________________
Transportation	-$_____________________	-$_____________________
Insurance (Home, Vehicle, Life)	-$_____________________	-$_____________________
Taxes	-$_____________________	-$_____________________
Clothing	-$_____________________	-$_____________________
Personal	-$_____________________	-$_____________________
Entertainment	-$_____________________	-$_____________________
Gifts & Contributions	-$_____________________	-$_____________________
Education	-$_____________________	-$_____________________
Credit Card Payments	-$_____________________	-$_____________________
Vehicle Payment(s)	-$_____________________	-$_____________________
Miscellaneous	-$_____________________	-$_____________________
REMAINING BALANCE	=$_____________________	=$_____________________

Before the Loan
This is the time to be realistic about your credit, learn your score and map out your car budget.

But first, some encouragement: Even if you have bad credit, you can still get a car loan. You will, however, pay a higher interest rate than will people with better credit. According to a recent report by Experian Automotive, 28 percent of new-car buyers and 54 percent of used-car buyers in the third quarter of 2014 had credit scores below 660. Customers with scores above 660 are generally considered to have good or great credit.

Borrowers with scores below 660 are seen as more of a credit risk, and can be grouped into one of three categories, based on score:

• Nonprime: Borrowers with scores between 601 and 660
• Subprime: Borrowers with scores between 501 and 600
• Deep subprime: Borrowers with scores below 500

In the third quarter of 2014, subprime and deep subprime buyers made up 32 percent of used car loans, and a bit more than 10 percent of new-car loans.

Average used-car buyers with a nonprime credit score received an annual interest rate of 9.29-15.49 percent for their auto loans, according to the Experian report from the third quarter of 2014. A subprime buyer got an average interest rate of 15.50-19.99 percent. Deep subprime buyers had an average interest rate of 19.99-29.99 percent on their purchases in the same time period. Interest rates for new cars were about 6 percent less per category.

Know What You Can Afford
Back to being realistic about your situation, and what you can afford: If you’re on a tight monthly budget, shopping for a used car will likely make the most sense, even when factoring in the lower interest rates offered on new cars. The average new-car loan among the nonprime, subprime and deep subprime credit groups in the third quarter of 2014 was $27,159 compared to $16,333 for used.

Here’s how those numbers work out in real life for a 60-month loan amount of $16,333, using the average interest rate received by each group of borrowers with scores below 660.

• Nonprime: 9.29 percent for 60 months = $341 per month
• Subprime: 15.72 percent = $394 per month
• Deep subprime: 19 percent = $423 per month

It’s clear that if you’re a deep subprime borrower looking for a $300 monthly payment, a loan amount of $16,000 won’t work. If you have your heart set on buying a car in that range, you’ll either need to save up enough of a down payment to get your loan amount down to about $11,500 (which, at 19 percent interest, amounts to a monthly payment of about $299) or look for a less expensive car. Understanding this before you start the shopping process will do more than help you save time: It will also save you the frustration of looking at cars that don’t fit your budget.

Applying for the Loan

Most dealerships have processes in place to help get subprime loans approved, and will usually have working relationships with subprime lenders. Some of the dealerships that are proficient in subprime lending will regularly work with upwards of 10 subprime lenders. In some cases, dealerships will even have dedicated personnel whose job is getting subprime and deep subprime loans approved.

Dealerships that regularly work with credit-challenged shoppers will know which lender will be most likely to approve your loan, based on your specific situation. Just as all buyers don’t have the same credit challenges, not all lenders have the same requirements. A dealership might need to place a buyer with a recent bankruptcy with a different bank than a buyer who has a low score because of a recent divorce. A dealer who knows where to send a loan can be the difference between a shopper getting approved or not.

Documents You’ll Need
Before heading to the dealership, have your paperwork in order. Lenders may need to see pay stubs or W-2 or 1099 forms to prove income. If you’re in a line of work that has hard-to-prove income, such as a restaurant server who has a lot of income in cash tips, bring in bank statements that show a history of consistent cash deposits to your account. Some lenders will accept bank statements in place of, or in addition to, standard pay stubs.

A utility bill, rental agreement or mortgage statement from your current address is something else a lender will likely ask for as proof of residency. To establish residency, the lender will expect to see your name on the bill. Some banks may also accept cell phone bills. Knowing where a borrower lives does two things for a lender. First, it shows stability. A borrower who has lived in her home for 10 years is likely to stay put, and banks like stability. The second reason is that the bank wants to know where to send the repo truck if the borrower stops paying.

Bring recent documents. The lender will likely want to see proof of residency and income that are no more than 30 days old. Having these documents in hand when you arrive at the dealership can be the difference between getting a loan response in a few hours instead of a few days. In addition to documents, some lenders will ask for personal references. When requested, the lender will want names, phone numbers and addresses.

Once You Get the Loan
Make your payments on time. When possible, consider making additional, or larger, payments on your loan. Those additional payments will look good on your credit report, make you look good in the eyes of the lender and save you money in interest while you have the loan.

If you run into trouble while paying the loan, tell the lender immediately. Some lenders will allow you to make small payments for a time, adding the remaining balance to the end of the loan. If the situation is dire, a bank may even allow a buyer to miss a payment or two while things get better.

“The most important thing they can do is keep communications going with the lender,” Less says. “Let the lender know what the circumstances are and lenders will generally work with the customers through temporary problems.”

How Your Credit Score Determines Your Auto Loan APR Find out what car loan rate you could get based on your credit score.

The importance of a good credit score can’t be understated when applying for any type of loan, but the particulars of loans vary depending on whether you’re buying a house or — in this case — a car. To get the best car loan rates, many experts would advise making sure you have an excellent credit score, minimal debt and a hefty down payment.

Although that’s true enough, it can be easy to get confused about credit scores and interest rates. You might often hear that a score of 700 or higher is an excellent credit score, but what interest percentage that equates to is unclear. The fact is, the value of credit scores is relative and depends on the lender’s standards for creditworthiness.

Get a better understanding of auto loan rates by credit score so you can adapt your financial strategy to get the best rates possible.

Keeping Score With Your Credit

To better understand what you bring to the table, find out what your credit score is. Thanks to the Fair Credit Reporting Act, you’re entitled to receive a free copy of your credit report once each year from the national credit reporting bureaus — Equifax, Experian and TransUnion. Many credit cards now offer cardholders free access to their credit scores.

Your credit score is determined by five different elements of your financial behavior:

• 35 percent based on payment history: how consistent you are about paying your bills
• 30 percent based on debts owed: how much you owe on credit cards, loans and other types of accounts
• 15 percent based on credit history: the length of time you’ve actively used credit
• 10 percent based on new credit: how many new lines of credit have you opened
• 10 percent based on types of credit: how many different types of credit you have, such as revolving credit or installment accounts

The Higher the Score, the Lower the Rate

People who have higher credit scores are considered less of a risk — that is, they’re more likely to pay back the full amount of their loan on time — than those who have lower scores. Lenders reward these lower-risk consumers with lower interest rates. The credit score, in effect, grades a pattern of behavior and, based on this grade, interest rates are determined.

Because there are three credit reporting bureaus, you actually have three credit scores and three credit reports, each of which might differ from the others. If you get scores of 780, 707 and 804, don’t panic; there will always be minor discrepancies among your scores and reports due to the bureaus’ individual reporting criteria and scoring model. But in this case, the scores are close enough to indicate that your credit is excellent.

The same principle applies when it comes to determining the interest rate you’ll get based on your credit score: Generally, the higher the score, the lower the rate, and vice versa. For instance, MyFICO.com breaks down its credit scoring and corresponding APRs for a 60-month loan on a used car into six categories:

Score Range	APR
720-850	4.95%
690-719	6.85%
660-689	9.399%
620-659	13.719%
590-619	18.806%
500-589	23.89%
*Rates as of 8/30/2016

How Low Can You Go?

When it comes to securing an auto loan, always try to settle for less — in terms of APR, that is.

In addition to your credit score, there are other factors that can affect the interest rate you get. Some of these include how old the car is, your debt-to-income ratio, down payment and the length of the loan term.

Age of Car

Because all cars depreciate — that is, they lose their original value — interest rates for loans on older cars are higher than they are for new cars. This depreciation causes a lender to be less eager to lend money to used-car buyers.

At Chase, for example, the average interest rate on a 48-month loan for a new car is 2.89 percent versus the used car’s rate, with the same terms, which is 3.19 percent.

Debt-to-Income Ratio

Like your credit score, lenders also use something called a debt-to-income ratio to estimate your ability to pay a monthly loan. You can figure out your DTI by adding up your monthly debt — including loans, utilities and rent or mortgage — and dividing that sum by your gross monthly income.

Your interest rate decreases as your debt does, so it’s not a bad idea to pay off as much debt as you can before applying for financing.

Length of Term

An auto loan term refers to the time you have to pay back your loan. Simply put, you make monthly payments until the loan reaches the end of its term. Most loan terms come in a variety of lengths, such as 84 months, 60 months or 36 months.

Generally, new cars with shorter terms also get lower interest rates. The downside to shorter terms is that monthly payments are higher. If a buyer can afford bigger payments, then he’ll end up spending less money on interest than he would with a loan with a longer term and lower monthly payment.

Down Payment

A sizable down payment signals to lenders that you’re a less risky bet and it might even help you get a lower interest rate. The opposite is also true: Those with a small or no down payment who are asking to borrow a large sum of money are a greater possible liability for lenders. Only putting down a small down payment can lead to higher interest rates, which lenders put in place to mitigate any potential loss.

Lenders Look at More Than Just Your Credit Score

While one or more blemishes might not be deal-breakers, having them on your credit report can affect your rate.

Income and expenses

The lender is less likely to view you as a risk if you have a higher income, because you’re more likely to be able to pay all your obligations every month. On the flip side, a high income may not help you get a better rate if your fixed expenses, such as your rent or mortgage payment, are especially high. For example, when applying for a mortgage, your total debt-to-income ratio must be 43% or lower to qualify for a loan with a reputable lender.

Down payment

The lower your loan amount, the less risk to the bank. Therefore, if you have a large down payment, the lender is more likely to be generous with the interest rate. If your credit score is borderline and you don’t qualify for a loan, a sizable down payment might even help you get approved.

Loan term

The length of the loan is important to lenders because a longer loan term gives more time for a default. Therefore, you can typically find a 15-year mortgage with a lower interest rate than a 30-year mortgage. Keep this in mind when you are applying for a loan. If you can afford a loan with a shorter term, your monthly payment may be higher, but you’ll pay less in interest over the life of the loan, and you’ll be out of debt sooner.

Collateral

If you’re applying for a car or home loan, the lender will look closely at the value of the vehicle or house because it will act as collateral for the loan. For example, say you want a $15,000 car. Add in $5,000 in after-market warranty and maintenance contracts, gap insurance and sales tax, and you’re seeking a loan for $20,000. Your loan-to-value ratio is 133% ($20,000 / $15,000 = 1.33). In this case, if the vehicle is totaled or you default on the loan and the lender tries to resell the car, it most likely won’t recoup the full $20,000. Therefore, the lender will likely call for a higher interest rate to compensate for the risk.

A loan with collateral, or a secured loan, typically comes with a lower interest rate than an unsecured loan because you’re pledging the collateral as repayment of the loan if you fail to make payments.

Liquid assets

You’re expected to use your income to repay the loan, but some lenders may want to know whether you have assets that can be converted into cash quickly to make payments in case you lose your job or experience other financial setbacks. These assets can be in the form of a savings or money market account, stocks or government bonds. If you have enough liquid assets to cover the cost of the loan, the lender may view you as less risky and may offer you a lower rate.

Employment history

If you’re applying for a loan, your current income may be enough to qualify you for a good rate. But the lender may choose to review your income from the past 24 months to measure income stability. If you have a spotty job history or you were unemployed recently, you might not be denied, but the issuer may still view it as a red flag. As a result, you could end up with a higher interest rate.

What you can do

You can improve your chances of loan approval with favorable terms by developing good credit behaviors like paying your bills on time and keeping your credit card balances low. Another strategy is to avoid applying for more credit than you can afford. In other words, if you have weaknesses in any of the aforementioned areas, borrowing conservatively can lower the overall risk of the loan to the lender, and these factors will have less of an effect.

Factors Lenders Use to Determine Auto Loan Approval

• Credit Score and History. Lenders decide their own acceptable level of risk they are willing to take on. Because it varies, it is hard to definitively say what constitutes a “subprime” or “bad” credit score. Your credit background will determine if a certain lender will work with you, set the amount you’re approved for, and play a factor in determining your interest rate.
• Income. These providers understand that your credit score is most likely not where you want it to be. That’s why they put added importance on your income. Income requirements vary across each program, but we strongly suggest that you have a monthly income of at least $1,500 pre-tax.
• Time on the Job. When trying to extend bad credit loans, lenders look for stability anywhere they can. A stable employment situation shows that your income is steady and that you have the ability to pay back the loan. As a result, applicants who’ve been at their current job for at least one year are viewed more favorably. If that isn’t the case for you, that doesn’t mean your application is dead on arrival. It just means that you may have to explain your situation when given the opportunity.
• Debt-to-Income (DTI) Ratio. Lenders and dealers will look at your debt-to-income ratio. To calculate your DTI ratio, add up all of your monthly bills and divide that number by your monthly pre-tax income. After factoring in a potential car payment, most lenders and dealers prefer to see your DTI ratio at 50% or less. They’ll also look at your payment-to-income (PTI) ratio. Most providers prefer that your potential car payment is no more than 15-20% of your income.
• Down Payment. Most bad credit auto loan programs require some form of a down payment. This can be in the form of cash, equity in a trade in, or a combination of the two. If you don’t have one, many of the available lenders will be unable or unwilling to work with you. A down payment is very important for the success of your loan. Paying money down gives you equity in the vehicle, reduces the total amount of interest you’ll pay, and can also shorten the term.

What Does My Car’s Worth Have to Do With How Much a Lender Loans Me?

Have you ever wondered how banks decide how much to lend you when you apply for an auto loan?

There are many factors banks use to evaluate risk. You are probably familiar with most of them including your credit and credit score, your debt and your income. You may even know that every lender weighs these factors differently.

One factor frequently overlooked (until the last minute) is the asset requiring a loan itself, like a home or car, and more specifically, what that asset is worth.

Understanding a fancy little term called loan to value (LTV or LTV ratio) will help you understand how a lender decides how much to loan you to buy an asset – in this case, a car!

LTV Ratio Definition

Loan to value is a risk factor financial institutions evaluate when determining whether to approve or deny a loan application. The loan is how much the lender plans to lend you, and the value relates to how much the asset in question is worth.

There is a formula banks use to evalute LTV, and that’s up next, but first you need to know…

Another Definition: What is LTV Percentage?

A lender’s LTV percentage determines the amount it will typically lend for an auto loan. Some banks will loan up to 100 percent of the car’s value – maybe more – and others lend slightly less, requiring a downpayment on the vehicle in most cases.

If The Bank Lends You Less Than You Need

But what if it’s not simple? What if you have a car with a value of $20,000, and:

• you have $4000 negative equity in your vehcile and want to refinance, or
• you have a $4000 debt from a previous car loan that needs to be rolled into the new loan?

In either case, you need to borrow a total of $24,000 from the lender, which means you need an LTV of at least 120 percent – the true market value of the car is less than the value of the loan.

Now, only Lender B would be able to make you a loan offer, or you will have to put down a down payment to cover the $4000 difference.

Steps To Determine a Bank’s LTV %

Contact the financial institution you hope to use to determine what its LTV percentage is. For this, you may also need to know:

1. What resource the bank uses to determine vehicle value – the NADA, Black Book or Kelley Blue Book values may all be different from one another.
2. Whether the lender uses vehicle’s trade in, loan, or retail value to calculate it’s LTV.
3. If the lender includes tax, title and license in it’s calculation. This may impact what you may have to pay out-of-pocket.

After you’ve gathered this info, look up the value of your vehicle using the same source the lender uses to determine the appropriate value, again using the same value as the lender. Then do some math!

Vehicle Value * LTV% = Vehicle Loan Amount

For example, let’s say you want to buy a car worth $25,000. If the lender you hope to get a loan through has an LTV of 70 percent, then your maximal loan amount with this lender is $17,500 for your car.

 

The Credit Score Used for a Car Loan: It’s Not What You Think

Is it time to finance a new vehicle? Then you’re probably trying to figure out how your credit score will impact your car loan. The FICO credit score often gets treated with the same reverence as the Coca-Cola formula. We know there is an algorithm used to determine our trustworthiness as borrowers. We know there are five major factors that go into your FICO credit score:

• Payment history – 35%
• Amounts owed – 30%
• Length of credit history – 15%
• New credit – 10%
• Types of credit in use – 10%

Even with all this information, there is still an air of mystery about the credit scoring process that only gets compounded by the fact that there are multiple versions. And not just old iterations that get updated, but specific industries have their own FICO scores! The auto-industry, for example, uses more than use your traditional FICO score when determining whether or not to offer you a car loan and what your rate should be.

This means that just looking at your credit score on your credit card statement or through CreditKarma doesn’t provide the full picture.

Different Types of Credit Scores for Car Loans

The FICO score used for a car loan is appropriately named “FICO Auto Score,” and it’s used in a majority of auto financing-related credit evaluations.

Lenders and car dealerships will probably use more than use the FICO Auto Score though. This is often coupled with the credit score you’re used to hearing about and seeing, known in the credit scoring industry as the “Base FICO Score.”

So, why do lenders need to use two different versions of a FICO score to determine if you’re eligible for a car loan?

The Differences Between Base FICO and FICO Auto Scores

The Base FICO Score helps lenders assess your likelihood of not paying back a borrowed sum in the future. This can be related to any and all of your credit obligations including a mortgage, credit card, car loan, student loan or personal loan. Base FICO scores range from 300 – 850.

The FICO Auto Score (and other industry-specific scores) focus specifically on the likelihood of you paying back a credit obligation in that field. So the FICO Auto Score will be weighted heavily by how you used car loans in the past, while your Base FICO score won’t have that behavior impact the score nearly as much. Industry-specific scores typically range from 250 – 900 instead of 300 – 850.

Ultimately, your lender will want to know if you’ve repaid your car loan(s) in the past. FICO Auto Score will give lenders information about the following:

• Have you made late payments on a current or previous auto loan or lease?
• Have you ever settled an auto loan or lease for less than you owed?
• Have you had a car repossessed?
• Have you had an auto account sent to collections?
• Did you include your car loan or lease in your bankruptcy?

As you can see, lenders really just want to know you’ll pay them back. This is why even with the Base FICO Score, one missed payment can have big consequences on your score. And just like with Base FICO Scores, there are different versions of the FICO Auto Score, with FICO Auto Score 8 being the most commonly used right now.

In addition, another FICO Score exists. It’s the FICO Bankcard Score, which is weighted more heavily by a specific topic (like credit card use) but is still different than the industry-specific scores. It also ranges from 250 – 900, which is why people might see that they have a credit score above 850.

All the scores have one big factor in common: the higher your score, the less risky you look to lenders.

How Do You Know Which Scores Are Being Used?

You can get an approximation of your FICO Score for free through a variety of tools including credit cards and websites. Or you can pay to gain access to your official FICO scores. If you elect to pay for access, then you should be sure to pull the specific scores your lender is using.

Unfortunately, car lenders don’t wear big signs saying which versions of your FICO and FICO Auto Score they’re going to use.

However, you may be able to figure out the scores they’d be using based upon which credit bureau from which the lender pulls your report. For example, if the lender is determining your car loan based on an Experian credit report, then he’ll likely be using Auto Score 8 and 2. Equifax would be Auto Score 8 and 5 while TranUnion is Auto Score 8 and 4. The Base FICO Score will probably be FICO Score 8.

A.P.R. and what you need to know about simple interest loans. The APR or Annual Percentage Rate is the rate of interest you will pay for your loan, this is how and where lenders make money for lending money to you. The interest of on your loan will be calculated on the existing balance on a daily basis. So every month as you pay down your original loan amount the interest calculation will change based on your balance. For example, if you have a $10,000 loan at 5% APR and you do not make any payments for a year the balance will be $10,500. If you have a $9,000 principal balance at 5% APR and you do not make any payments for a year the balance will be $9,450. Another way to explain it is if you have a 2 year loan for $10,000 at a 5% APR your regular monthly payments will be $438.71 every month for 24 payments, your total of payments at the end of the year will be $10,529.04 the reason the total interest over two years seems less than 5% is because every time your original balance drops the APR calculation changes (i.e. payment number 1 will be $397.05 + $41.67 in interest with a loan balance of $9,602.95, your 12^th payment will be $415.63 + $23.08 in interest with a loan balance of $5,124.71 and your last payment will be $436.89 + $1.82 in interest with a loan balance of $0). It looks as if all the interest is compounded towards the front of the loan although that is not true, what happens is as the original balance drops with each monthly payment the interest calculation also drops because the lender can only charge interest on the balance they have loaned on any given day for the length of time it is lent. So if you make extra payments over the course of the loan and pay your original loan amount down faster than the term given to you your interest charges will be reduced.

There are many factors that lenders review during the auto loan approval process. Below you will find a list of some of these determining factors along with explanations of each:

Picking the Right Car

It helps to understand that lenders do not view all cars with the same selling price the same way. Imagine two $12,000 vehicles: The first is a 3-year-old economy car with 36,000 miles and the other is a 10-year-old sports car with 120,000 miles. Although both cars have the same selling price, a lender may approve a loan on one vehicle and not the other. A subprime lender is more likely to approve the newer car with fewer miles.

Lenders use a complicated formula when deciding which cars to finance and the criteria can vary among banks. The vehicle’s age, mileage, history and the buyer’s credit history all play a role in what will be approved. So if you’re approved for financing, you may have to pick a car that gets a lender’s OK, and it might not be the one you had your eye on. Prepare to be flexible. Also, that high interest rate you’re going to pay may sting, but remember that for many buyers who are rebuilding credit, it’s temporary.

“Generally, if somebody has made good payments for 18 months, assuming the customer hasn’t created new credit problems, then there may be an opportunity to get a lower interest rate.” Your options could be trading in the car after you’ve established a good payment history and buying a different car with a lower interest rate. Or, once your credit is on a better footing, you could refinance the loan at a lower rate with a different lender.

Start Saving for a Down Payment

Most Every day, car shoppers cannot buy vehicles with little or no down payment. If you’re a shopper with subprime or deep subprime credit, the chances of buying a car with no down payment are slim. Many lenders will require at least 15 percent down payment, or $1,000, plus all taxes and fees whichever is greater. Trade-in vehicles can also be used as down payment.

However, a trade-in by itself may not be enough. Depending on the severity of the blemishes on the borrower’s credit report, some banks may require a cash down payment in addition to a trade-in that the car shopper owns outright. This shows the bank that the borrower is serious and committed to maintaining a loan. The more money (or trade equity) the buyer brings to the table, the better the chances of a favorable approval.

Credit History–

Your credit score is like the CliffsNotes for your credit history, giving a brief overview so the lender doesn’t have to dive too deeply into your credit reports. However, the lender may still choose to investigate further if something looks off. It may look for:

• Delinquent accounts
• Unpaid collection accounts
• A past bankruptcy
• Foreclosures, unpaid tax liens or civil judgments
• The number of recent hard credit inquiries
• Outstanding debts

Many auto lenders no longer consider credit score to be a factor in determining a credit approval. In today’s auto finance world lenders will review your credit history. Things they look for are previous auto loans with good payment history, if there are late payments they look at how many and how late they were. They look for unpaid creditors, judgements, repossessions and any other negative or positive aspects of your credit history. Although these items are not typically a determining factor in the approval process. This review simply lets the lender know a basic overview of what type of credit risk you may be.

The biggest factor in determining an auto loan approval is stability (i.e.: the ability to pay and continue to pay every month).

DTI or Debt to Income -Total monthly income compared to fixed and basic living expense.

This ratio has a huge impact on what monthly payments you may qualify for. Lenders do not want you to be stretched to every last dollar because they know that there are always unexpected expenses that pop up as well as if your automobile has any mechanical breakdown or regular scheduled maintenance that could impact your ability to make the recurring monthly payments in a timely manner. If you do not budget this properly everyone will lose. You could have the vehicle repossessed and lose all the payments and down payments you have already made and the lender could lose money in the resale of a repossessed vehicle. How you calculate your DTI is you take your total gross monthly income and deduct all of your fixed expenses (i.e.: rent, mortgage, insurance, utilities, tuition, credit card payments, other loan obligations and any other recurring monthly expense) you also want to deduct a percentage of your income for other expenses like food, entertainment, gas, clothing, vacation, charity, and other miscellaneous things you may spend money on. How much of your gross monthly income you have left over after all of your deductions will give the lender an ability to calculate you DTI (debt-to-income) ratio. For example if you make $4,000 per month and have total expenses of $2,000 per month you are at a 50% DTI and have an excess of $2,000 per month being unspent currently and should not have an issue making your payments on time every month even when those unexpected expenses occur. The more excess monthly cash on hand the lower the risk for the lender, if you are maxing out your monthly income the higher risk your loan will be. Therefor budget and affordability is one of the biggest factors when it comes to auto loan approvals.

Job history and length of time on job

This is another big one. Lenders want to know you have a steady and reliable source of income. The way they see it is the person who has been at the same job for a long time is less likely to lose their job, switch jobs, or have any other time when they do not have a steady income. The person who changes jobs every few months shows a lender that person could be less reliable in making regular, timely monthly payments. Again it all goes back to risk, the steadier your job and income history the less risk your loan will be, the less consistent your job and income history is the higher the risk will be for your loan.

Residence history and length of time at the same residence.

This is another huge factor when it comes to auto loan approvals. A person who owns there home or has lived at their home for many years will equate to a lower risk loan for a lender. Simply stated, they know where you live. The person who moves every few months or every year could be viewed as someone who struggles to pay their rent or mortgage and in the event of a default this person will be harder to find, along with the collateral the lender is loaning you money for (i.e.: your car).

Bank account history

 You may ask what a bank account has to do with getting a loan. Simply stated, bank account statements can tell a lot about a person’s money management skills. It also shows that you have the ability to write checks or make payments using the account. A person who does not have a bank account will have a far more difficult time making regular monthly payments than the person who can write and mail a check every month or have an automatic deduction set up.

Loan to value (LTV) in relation to Collateral and down payment.

 This one is a little more complicated than the previous. Let’s start by explaining what Loan to Value means. Whenever a lender reviews an auto loan credit application they take huge consideration into what they are lending you money for, (a car). When considering an approval the lender will research the vehicle you are interested in purchasing, with that research they will calculate the vehicles retail value and based on all the factors stated above they will determine what amount of money in relation to the vehicles value they are willing to lend you. For example, if you are buying a Toyota Camry with a real retail value of $10,000 and you put a down payment of tax and tags plus $2,000 you would be looking for an $8,000 loan (80% Loan to Value). The lower the loan to value the lower the lenders risk, the higher the loan to value the higher the lenders risk.

Risky Business: What’s the Big Deal?

From a financial institution’s prospective, a loan is an investment in your asset. The likelihood of a bank or other lender losing money on its investment increases when the value of the asset decreases.

If Sally buys a car, for example, with a loan amount of $25,000, and she defaults on that loan, her bank’s only recourse is to repossess her car. But if the market value (more on that later) is only worth $22,000, less than the outstanding loan balance, there is no way the lender can recover the $3000 difference. (Ouch! Sally was a bad investment.)

For this reason, high loan to value ratios are usually considered high risk for financial institutions.

When a loan goes into default and payments are not being made a lender will be forced to repossess the vehicle which cost money. It will cost the lender money to hire a repo company and any legal fees involved in the repossession process. Once the vehicle is in the lenders possession they will re-sell the vehicle at an auction. Therefor if you take a loan with an 80% LTV and you have a loan balance of $8,000 and the vehicle sells at auction for $7,000 the lender will have a loss of $1,000 plus all repo and legal fees. So if you have a lower LTV when you originally take the loan the lower the chances are of the lender taking a loss in the event of a default. The way you reduce risk and lower the LTV is by cash or trade down payments, the bigger the down payment the lower the LTV the lower the risk to the lender the better chances you have of an approval.

To sum this all up:

1. Your Credit Score

If you already realize how important your credit score is to your financial health. When it comes to the long-reaching implications of that special number, your transportation costs are no exception. The single biggest factor in determining your auto loan rate will likely be your credit score.

Lenders use credit scores to gauge your financial responsibility, history and reliability. Your score can be affected by factors like on-time payment history, number of open credit lines, age of credit history and derogatory marks.

2. Debt-to-Income Ratio

Debt-to-income ratio is a simple and intuitive measure of your ability to pay a prospective lender back. Having a lot of money in outstanding debts could decrease your perceived reliability as a borrower, and result in less friendly terms. The more income you have available, the more confidence the lender will likely have that you will pay them back, and you may be rewarded with more competitive terms.

3. Amount Borrowed and Down Payment

Lenders determine auto loan rates not only by assessing your credit worthiness, but also by considering how much they’re going to have to lend. Paying a significant portion of your auto loan via down payment can signal to a prospective lender that you can and will pay off your loan in a reliable manner. Similarly, borrowing an especially large amount of money or offering little or no down payment will up the risk for the lender, probably resulting in a higher interest rate to balance out the lender’s exposure.

In basic terms: The more money you can pay upfront for your new car, the better chance you have of getting approved.

4. Age of Vehicle

Generally, loans given out for used cars come with higher interest rates than those for brand new vehicles. A new car has a higher chance of remaining reliable and reducing the amount of money you may have to pay in regular maintenance and repairs. These realities make it more likely that a prospective lender will try to recoup some value by considering higher auto loan rates on older cars.

5. Length of Term

Just like with the other factors, lenders will try to hedge their bets when it comes to the length of your term. The shorter the term of your loan, the quicker the lender can expect to get their money back, and the friendlier the terms usually will be. Keep in mind that while a short-termed loan may come with noticeably lower interest rates, your payments will likely be higher and the loan could put relatively more stress on your budget. If you’d like to space the repayments out over a longer time to provide yourself with more cushion, please keep in mind that you’ll probably pay a premium for the convenience with higher interest rates.