1 in 10 auto loan applications are rejected — use these 3 tips to get approved

New data from the Federal Reserve Bank of New York found that auto loan approval rates are dropping for U.S. buyers.

Of those who applied for auto loans in October 2025, 15.2% — or more than 1 in 10 — were rejected. That’s a big uptick from the second-most recent June 2025 figure, when just 6.7% of applicants were rejected.

Here’s why the auto loan market is tightening, and what you can do to increase your odds of getting approved.

“What we’re seeing is a lot more declines in the subprime market,” says Sean Tucker, a 25-year veteran of the auto financing and insurance industry managing editor at Kelley Blue Book. Credit bureau Experian considers those with credit scores between 501 and 600 as subprime, and scores between 300 and 500 as “deep subprime.”

Tucker explains that providers may now be more skittish, after two lenders that specialize in subprime loans — Tricolor and PrimaLend — declared bankruptcy last month. “That has lenders very nervous about the subprime end of the market,” he says.

It’s not uncommon for bigger banks to buy bundles of these loans from smaller loan providers, and the bankruptcies have come with a cost for the larger banks, too. “Lenders are nervous after those bankruptcies,” Tucker says.

Start by checking your credit report for errors. Data from a 2024 study by Consumer Reports found that more than half of Americans have a mistake on their credit report. These mistakes can range from the wrong name to debts that are incorrectly reported or appear unpaid. If you find an error, dispute it by writing a letter to the credit bureau where the mistake appears.

Keeping your credit utilization rate low can also help: This is the ratio of the credit you’re using compared to the amount that’s available to you. Paying off debt can help you lower this ratio. But, so can increasing your credit limit, or the potential amount you could borrow on your accounts like your credit card. Asking your credit card company for a higher limit while keeping the same or lower balance can decrease your credit utilization ratio. But using that credit won’t help your ratio, so don’t use this as an opportunity to splurge.

Lastly, paying your bills on time and in full is an effective way to raise your credit score over time. If you want to add more favorable on-time payments, like rent payments or things like cell phone bills, use a service like *Experian Boost®.

And, it’s not just about getting approved: With a higher credit score, you’ll unlock lower auto loan interest rates so you’ll pay less in interest over time. Getting multiple approvals will allow you to compare them and shop around for rates. Plus, in many states, having a higher credit score can help you save on your new car’s insurance, too.

Increase your down payment

The more you’re able to save for your down payment, the less you’ll need to borrow. That makes you less risky to potential lenders and in turn can lower your rates.

The percentage people have been putting down on auto loans has been declining, Tucker says. But, 20% is still the gold standard. “Last month, lenders were accepting just 13.3% as a down payment. So if you can come in with 20%, you might be able to qualify for a better rate.”

While that may mean taking time to save up a bigger down payment, it could also mean looking for a less expensive car. A lower purchase price will make your down payment funds stretch further and help you get closer to or exceed that 20% amount.

Shop for your loan before you shop for your car

Before you get your heart set on a certain vehicle, get your financing in order.

“We like to tell everyone to have loan offers in hand before you go to the dealership,” Tucker says. While many dealers can arrange financing for you, their auto loan rates are not always the lowest.

Banks you already have a relationship with and local credit unions could offer you the best auto loan rates. “If the dealership can beat what your bank or your credit union did, then great, let them,” Tucker says. “But if you don’t do your research and just accept what they offer on the spot, it might not be the best you could have done.”

When you’re ready to apply for an auto loan and start the shopping process, get pre-approved for an auto loan. These pre-approvals typically last 30 to 60 days according to Experian. While getting approved it does create a hard inquiry on your credit report, the credit bureaus will count multiple inquiries as a single one if you do all of your shopping in a short time frame, typically within two weeks of your first inquiry.

Once you have a few offers, compare them. But don’t just focus on the monthly payment: Look at the loan’s length and interest rate. Tucker suggests avoiding loans with terms longer than 72 months, as this can lead to loan balances that are higher than the car’s value since cars tend to depreciate rapidly.

A long loan term can also increase the amount of interest you’re paying over the life of the loan. “We really caution people not to be in debt longer than they need to be,” he says.

At CNBC Select, we work with experts who possess specialized knowledge and authority, gained through relevant training and experience. For this story, we interviewed Sean Tucker, a managing editor for compact and full-size vehicles at Kelley Blue Book. He’s covered the insurance and automotive industries as a writer and editor for the past 25 years and has written for U.S. News and World Report, CNN and the BBC. 

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