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Buying a new car can be exciting — and expensive. See how much you can knock off the bill by having excellent credit scores. [[{“value”:”

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You’ve done it. You’ve saved up your pennies — alright, a lot of pennies — and you’re finally ready to buy that new car.

Or are you?

If you haven’t been building your credit score while you worked on building your down payment, you may not be as ready as you think. Having a low credit score can easily add thousands of dollars onto the total of your new car purchase.

Pro tip: If you’re saving up for a new car, make sure to keep your down payment in a high-yield savings account so it can grow even faster. Check out our favorite high-yield savings accounts for APYs up to 5%.

A high score can cut your APR by more than 10%

According to Experian data, the difference in interest rates for a new car loan can vary by more than 10% from the top of the credit chart vs. the bottom tier.

Here’s a look at the average rates for each credit score bracket:

Credit Score RangeAvg. Rate for a New Car Loan781 to 8505.25%661 to 7806.87%601 to 6609.83%501 to 60013.18%300 to 50015.77%
Data source: Experian (VantageScore® 4.0)

In other words, if you have poor credit, you could wind up with an interest rate more in line with a credit card than an affordable installment loan.

Borrowers with the best scores can save $200/month

While it’s one thing to talk about the difference your score makes for your interest rate, it can be hard to picture that in real-world numbers. So let’s look at an example for better context.

Let’s assume a typical new car loan of $40,000 and a term of 60 months. Here’s what you’d pay each month, as well as how much you’d pay overall:

APRMonthly PaymentTotal Cost5.25%$759$45,566.366.87%$790$47,375.819.83%$847$50,792.3913.18%$914$54,828.7815.77%$955$57,310.22
Data sources: Experian, author’s calculations

So, someone who qualifies for an APR at the low end of the spectrum would have a monthly payment around $759, while someone at the other end would be paying almost $200 more every month.

Over the course of a 60-month loan, the person with good credit will pay around $5,600 in total interest, while the person with poor credit will fork over a whopping $17,300 in interest fees. That’s a difference of almost $12,000.

Great credit also helps your insurance rates

A lower interest rate isn’t the only new car benefit from a high credit score. Having great credit can actually help you get cheaper auto insurance rates, too.

Like lenders, insurance companies often check your credit history when determining your rates (except in California, Hawaii, and Massachusetts). Information from Consumer Reports suggests a great credit score could knock $233 to $1,300 off your insurance premium.

A new car is a big purchase, no matter what. But you can definitely mitigate some of those costs by ensuring your credit score is in great shape before you go car shopping.

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