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I have been tried to get pre-approval for an auto loan from different companies like Carmax and Carvana. Before I applied, they had a calculator to estimate payments, and the asterix, it says "Rates depending on good credit score". My credit score is above 800. Yet, when I finally get the pre-approval numbers from for a loan, they say my rates are 2-3x advertised. Ex. Carvana said someone with 750-850 should get 6.99% interest rate, but after putting in my details, including salary of 75k/year, they only gave me an offer of 14%. Is there some factor I'm overlooking beyond my credit score explaining why the interest rates are so much higher than what they initially suggested?

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    No way to know for sure unless you ask them directly but I'd guess your income is too low compared to the loan amount/your existing loan balances.
    – 0xFEE1DEAD
    Mar 4, 2023 at 17:10
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    The best rates are reserved for those that don't really need loans. Also, borrowing from the people selling cars is often a bad idea (sometimes dealer financing incentives are worthwhile).
    – Hart CO
    Mar 4, 2023 at 19:52
  • @HartCO You have to be precise. Buy-here-pay-here places are bad ideas, where the loan is carried by the dealer. However, mainstream dealers act as a loan agent to the manufacturer's captive finance and other independent lenders. The majority of loans are originated through the dealer, and it's the only way to get subvented (subsidized) financing. Last time I got a car, I compared rates to banks, and the dealer's captive offer was 0.1% APR worse than the best bank, which would have been eaten up by the extra time and paperwork.
    – user71659
    Mar 4, 2023 at 22:53

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Getting a car loan approved is based on your credit score, your recent credit activities, your income and current obligations. Having a poor credit score or a thin file can result in a higher interest rate. If they feel that this loan is riskier they will quote a higher interest rate.

You may find that the best rates are from your bank or credit union. They should also take the time to explain how they arrived at your number and what you can do to get a more affordable loan.

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  • Note that all those factors matter, as does how much you want to borrow. The bank is trying to decide if it is confident that you can and will make all the payments. If they think you are borrowing more than you can reliably afford to pay back, they will decline the loan, or increase the rate to reflect that lack of confidence. In fact, you might want to consider that they could be right, and look for a cheaper vehicle... though right now even prices of used cars have been pushed upward by the parts shortage. "Trade wars are easy to win," my left buttock.
    – keshlam
    Mar 4, 2023 at 18:12
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What you are discovering is that your credit score is irrelevant to a lender. It's a magic number produced by a secret formula known only by the credit agency. And each agency has a different formula.

Potential lenders are looking at the underlying credit record. And they are also looking at your income and job stability (which isn't even covered by a credit score).

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