Auto Loan Rejections Are Rising: What You Need to Know and How to Get Approved

Recently, more people in the U.S. are having their car loan applications turned down.

According to the Federal Reserve Bank of New York, over 15% of those who applied for auto loans in October 2025 were rejected. This is more than double the rejection rate from June 2025.

Here’s why this is happening and what you can do to improve your chances of getting approved for a car loan.
 

Why Are More Auto Loans Being Rejected?

1. Subprime Borrowers Are Hit the Hardest

People with lower credit scores are facing most of the rejections. Your credit score is a number between 300 and 850 that shows how likely you are to pay back loans.

Banks are now more careful, especially after two companies that gave a lot of loans to people with low credit scores went bankrupt.

This made other lenders nervous, so they are denying more applications from people with lower credit.

2. Higher Scores Are Less Affected

If you have a middle or high credit score (above 600), you’re less likely to be rejected. You don’t need a perfect score, but being above that 600 mark puts you in a stronger position.
 

How to Increase Your Chances of Getting Approved

Here are three tips to help you get approved for a car loan and possibly get a better interest rate:

1. Work on Your Credit Score

A higher credit score can help you get approved and qualify for lower rates.
 

• Check your credit report for mistakes: Many Americans have errors on their reports. Fixing these mistakes can help raise your score.
• Keep your credit use low: Don't borrow up to your limits, and pay off debts when you can.
• Pay bills on time: Late payments hurt your score. Paying on time will help strengthen it.
• Consider tools like Experian Boost: Some services let you add on-time bill payments (like rent or phone bills) to your credit report.

2. Save for a Bigger Down Payment

The more money you can put down upfront, the less you have to borrow, which can make you less risky to lenders.

While 20% down is considered ideal, offering more than the average down payment could help you secure a better loan.

3. Shop for Loans Before Going to the Dealership

Get loan offers from your bank or credit union before shopping for a car. Compare these offers to what the dealership provides. This gives you options and can help you avoid higher interest rates.

When you apply for multiple loans in a short time frame (usually two weeks), the credit checks usually only count as one inquiry on your credit report.
 

What Disqualifies You from a Car Loan?

A low credit score is the main reason people are denied. Raising your score can help both with approval and with getting a better rate.
 

What Credit Score Do You Need?

There’s no official minimum, but it's much easier to get approved with a score above 600. People with lower scores are finding it harder to get approved right now.

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