If you need to buy a car and have bad credit, securing an auto loan might seem like a far-fetched idea.
While the best approach for getting a loan is to work on building up your credit and saving enough for a substantial down payment, there are times when life and finances don’t exactly align, and you just need a car. In that case, buying a car with $500 down and a 500 credit score can be attainable – albeit challenging.
Here’s what you need to know to make the process as smooth as possible.
Your credit score is a number used by lenders to determine how likely you are to pay back a loan on time. There are two common types of credit scores: FICO and VantageScore.
Lenders typically use the FICO score range to determine whether or not to approve an auto loan. FICO offers Base credit scores (between 300-850) as well as industry-specific scores. FICO scores that range from 670 and above are typically categorized as good. FICO Auto Scores fall between the 250-900 range. Both FICO’s Base and Auto scores are grouped similarly when determining credit quality. The VantageScore model differs from FICO in some of its criteria but is also calculated on a 300-850 scale.
Experian’s State of the Automotive Finance Market Q2 2025 report designates the credit score tiers as such:
Generally speaking, you’re likely to get better financing and interest rates if you have a higher credit score. According to Experian, which based its figures on the VantageScore model, the average annual percentage rate (APR) during Q2 of 2025 for a new car in each credit tier was:
You may likely be able to get a car loan with a 500 credit score. However, you should expect to have a higher interest rate at 15.97% or higher compared to a prime borrower who would get a competitive 6.78% rate, per the Experian data.
For used cars, Experian reported the following APR for each credit tier during Q2 of 2025:
Simply put: yes, it's possible to put $500 down on a car through specific lenders and programs, though you should expect limited options and stipulations.
In general, the recommended down payment on a new car is 20% and 10% down on a used car. However, this isn't always realistic. In fact, this is true for many borrowers. In Q2 of 2025, which ran April 1 to June 30, the average down payment on a new car was $6,433, and the average down payment on a used car was $4,092. The average amount financed for the same quarter was $42,388 on new cars and $29,082 on used cars, according to Edmunds. For a new car, that's only a 15.18% down payment.
Down payments take the risk away from lenders and transfer it to the borrower. A down payment helps cover the depreciation value of the car once it's sold and protects the lender if you default on a loan.
Borrowers with a 500 credit score or lower are considered subprime and will have to work with special lenders. Most subprime lenders still require a down payment of at least $1,000 or 10% of the vehicle's selling price. If you're only putting $500 down, you can expect higher interest rates on your loan.
If your credit score is less-than-perfect and you're in need of a car loan, you'll want to find a lender that works with people with poor credit. Subprime lenders can assist borrowers in a variety of credit scenarios, including those who:
Subprime auto loans are slightly different from traditional loans. With a traditional loan, you're more likely to be able to work with a direct lender like a bank or credit union to get financing, and then take the loan to the dealership directly.
Subprime lenders, however, will often consider more factors about a borrower's ability to repay the loan by looking at the following:
Subprime lenders work through special finance dealerships. In order to get a subprime loan, you'll need to qualify before you choose a car. The lender will determine your eligibility and make a payment call to the special finance manager if you're approved. A payment call informs the dealer about the maximum monthly payment you qualify for. After that, you can find a car that meets both your needs and the lender's requirements.
Going to a buy here pay here (BHPH) car lot could also be an option. At BHPH dealerships, you could conceivably put $500 down on a car with no credit check, as these dealerships typically don't run credit checks. Instead, BHPH dealerships, which are considered in-house financers, will check your income and ability to make a down payment.
Having practical expectations based on your financial situation will help you make smarter choices before you begin your car search and head to the dealership. Here's what you should anticipate.
Start by doing some research on vehicles and their values. Kelly Blue Book (KBB), Edmunds, and NADA Guide are reliable sources. Then, consider what you can realistically afford.
Keep in mind that subprime lenders will have guidelines on the type of car you can buy. Typically, lenders require that subprime borrowers purchase a car that is 10 years old or newer and has less than 100,000 miles on it. Opting for a used car can be beneficial in keeping costs down, though inventory can be limited.
Subprime borrowers are usually considered higher risks to lenders. Therefore, depending on your current credit score and the lender, you can expect to have higher APR rates on your loan. While the final number will depend on your credit situation and the lender, people with bad credit can expect rates between 15% and 20%.
In addition to higher APR rates, subprime borrowers might get stricter or longer loan terms on their purchase. Buyers with lower credit scores often seek longer loan terms. According to Experian, most loans for subprime borrowers range between 60 and 70 months. While a longer term can keep your monthly payment lower, you could pay more in interest in the long run.
Getting approved for a car loan with a 500 credit score and a $500 down payment isn't entirely out of the realm of reality. It's possible if you do your homework before you shop and are realistic about what you can afford. Be prepared for fewer car choices, higher interest rates, and longer loan terms.
Automotive Editor
Lindsey Grant, a native Detroit suburbanite, is a seasoned magazine writer and editor who launched her editorial career in business-to-business publishing in New York City. Throughout, she has covered the NYC cultural scene, jewelry store crime, the cuddly business of pets, and the supermarket sector. As a content manager for Auto Credit Express and Cars Direct, she's eager to deepen her knowledge and explore the world of the automotive industry. Read more
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