Is my credit score really the deciding factor on whether I will be approved for an auto loan?

Although your credit score is an important part of your approval process, it’s more an indicator on your interest rate.  People with less than perfect, or even bad credit, can still obtain auto loan financing as long as other criteria is met.  Some of those criteria are:

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.

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 lower your interest rates are likely to be.

Age of vehicle.
Generally, loans given out for used cars come with higher interest rates than those for brand new vehicles. This may seem counter intuitive, but it makes sense considering that older cars have already begun to depreciate in value. Car dealerships have less to gain by selling less expensive cars, and used car loans often come with shorter terms. 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.

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.