30% of Americans don't think they can get a car loan — here's how to improve the odds of being approved

About a third of Americans (31.8%) think they'd be rejected for a car loan, according to a February 2024 survey from the New York Fed's Center for Microeconomic Data. That's the highest rate since the center began polling consumer expectations in 2013.

Some of that may be perception: Rejection rates for auto loans actually dropped about 9 percentage points from October 2023. Weaker candidates may be holding off, however, as application rates also decreased by 3.7 percentage points.

Car prices are still elevated but declining according to the Cox Automotive/Moody's Analytics Vehicle Affordability Index, which found monthly car payments averaged $744 in February 2024.

That's down from $749 in January 2024 and a high of $795 in December 2022.

The good news: If you need a car loan, there are always ways to improve your odds of getting approved.

You typically need a credit score of 670 or better to qualify for a car loan but there are lenders that work with borrowers who have bad credit: The car-loan marketplace MyAutoloan allows shoppers to compare loan terms and rates, with options for those with FICO scores of 600 or greater.

It also offers refinancing options and lease buyout loans.

Capital One Auto Finance offers prequalification without a credit check, so your credit score won't take a hit from a hard inquiry. Borrowers can take advantage of the lower rates available from a large national bank, with a minimum loan amount of $4,000 and terms ranging from less than 12 months to 84 months.

Capital One's Auto Navigator tool allows applicants to both shop for financing and look for new and used cars at more than 12,000 participating dealerships

Paying more up front lowers your payments and the time it'll take to pay off your loan. (Since your loan-to-value ratio is reduced, it may also get you a lower interest rate.) Every situation is different, but for every $1,000 you put down, your monthly payment will drop about $20 a month, based on a 5% APR.

If you want to save up for a heftier down payment, a high-yield savings account can get you there faster. With a robust 4.00% APY (when you make monthly deposits of at least $250 or more; without deposits a 3.00% Standard APY applies), LendingClub LevelUp Savings is one of CNBC Select's top picks in the category. There's no minimum balance requirement.

If your credit score is below 670, it could be hard to approved for a traditional car loan. If you can wait to buy a car for a few months, work on raising your score. Focus on making on-time payments in full on revolving debt like credit cards.

You can also ask your card issuer to raise your credit limit: if you leave that extra credit untouched, it will lower your credit utilization ratio.

And it's always good practice to review your credit reports from all three reporting agencies for errors that may be lowering your score.

Phone, utility and subscription payments aren't usually sent to credit reporting agencies, but *Experian Boost® is free service that connects them to your Experian report. Only positive on-time payments are sent, so any slip-ups won't hurt your credit.

While your income isn't reported to credit agencies, lenders will also look at your debt-to-income ratio (DTI), which is the amount of debt you're carrying each month — including rent or mortgage payments, credit card bills and student loans — divided by your gross monthly income. In general, lenders like to see that you're spending no more than 35% of your income on paying off debts.

A debt-consolidation loan with a lower interest rate than you're currently paying can shring your DTI and make you a more attractive candidate for a car loan. Achieve offers flexible terms and payment dates for its debt consolidation loans and you can qualify for approval with a credit score of 620.

A low score may translate into a higher interest rate, however, so be sure to look at your finances to see if you come out ahead.

If you have bad credit or not much of a credit history, a co-applicant with good credit can greatly increase your chances of approval.

Anyone you ask to co-sign a loan should understand it will show up on their credit report and that they will be financially responsible if you are unable to make payments.

Higher interest rates and car prices have been driving up rejection rates for auto loans. But there are steps you can take that will boost your odds of getting approved.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.