Car loans with bad credit: what subprime auto loans cost (2026)

What counts as a subprime auto loan?

There's no legal line. The CFPB's auto research used a credit score of 620 or less, which it calls one common definition of subprime.

Subprime borrowers pay more and default more often. In the CFPB's data, 15.9% of subprime auto loans ended in default roughly three years after they were made, compared with 3% of other auto loans ^[1]. The study also found that rates varied by more than default risk alone explains, with down payments, vehicle values and lender practices among the possible reasons ^[1].

Auto debt is also under strain right now. Auto loan balances reached $1.71 trillion in the second quarter of 2026, and the share of auto balances moving into serious delinquency (90 days or more late) was 3.00%, up from 2.93% a year earlier ^[7]. The New York Fed said new auto delinquencies remain elevated ^[7].

Should I check my credit before I shop for a car?

Yes. The FTC says to get a copy of your credit report before you visit the dealership, so you know what lenders will see.

The FTC also suggests comparing financing offers from several lenders and the dealer ^[5]. A quote from a bank or credit union gives you a rate, a loan length and a maximum amount you can hold up against the dealer's offer ^[4].

• Pull all three reports for free at AnnualCreditReport.com.
• Dispute anything wrong before you apply. Here's how to dispute credit report errors.
• Shop rates within a short window. Our guide to hard inquiries explains how scoring models treat several auto loan checks.

What is a buy here, pay here dealer?

A dealer that lends you the money itself, usually to people with no credit or poor credit. The CFPB says their rates tend to run higher.

These lots often advertise "no credit check" or pitch themselves as a way to rebuild credit. The CFPB warns that many of them report only negative information, like late payments, to the credit bureaus. On-time payments may not help you at all, while a late one still hurts. If you buy from one, ask them to put in writing that they'll report your on-time payments ^[2].

The CFPB's data shows how much the lender type mattered. About 15% of subprime bank borrowers fell 60 or more days behind within three years. At finance companies and buy here, pay here dealers it was 25% to 40% ^[1].

How do a bigger down payment and a cosigner change a car loan?

A down payment cuts the amount you borrow, so you pay less interest. A cosigner can help a weak application, but they owe the debt as much as you do.

Per the FTC, a down payment reduces the amount you need to finance ^[5]. Run your own numbers in the calculator below. Change the down payment and watch the total interest move.

A cosigner takes on equal responsibility for the contract, the FTC says ^[5]. A cosigner may have to pay the full debt plus late fees or collection costs, the lender can go after them without first trying to collect from you, and a default can show up on their credit record ^[6]. Ask only someone who could afford the payment if you couldn't.

What is yo-yo financing, and how do I avoid it?

You take the car home before the loan is final, then the dealer calls to say the terms fell through and offers a costlier loan. Wait until it's final.

The CFPB calls the first step spot delivery or conditional financing. Most auto contracts let the dealer renegotiate if the deal doesn't go its way, and the new offer can mean a higher rate, a longer term or a bigger down payment ^[3]. You don't have to accept new terms. You can walk away, and the dealer should refund your down payment ^[3].

1. Check the numbers Make sure the interest rate and loan terms are the ones you agreed to ^[3].
2. Fill every blank Finish the paperwork, with every field filled in and signatures from you and the dealer ^[3].
3. Take copies Leave with a copy of everything you signed ^[3].
4. Wait if the approval is pending The FTC says that if the dealer is still working on the approval, the deal isn't final. Consider keeping your current car until it is ^[5].

Can a credit union help if my credit is bad?

It can. The CFPB says that even with weak credit, it may be worth checking a bank or credit union for better terms than a buy here, pay here lot.

Borrowing directly from a bank or credit union tends to cost less because you skip the dealer's markup, and you don't have to stick with the institution you already use ^[4]. Federal credit unions also have a rate cap. The law generally sets it at 15%, and NCUA's board has extended a temporary 18% ceiling through September 10, 2027 ^[8]. That cap covers federal credit unions only.

One caution from the CFPB's research: banks and credit unions making subprime auto loans tended to lend to borrowers with higher scores than finance companies and buy here, pay here dealers did ^[1]. Apply, but have a backup.