Are you in the market for a new or used vehicle and considering financing options? Capital One Auto Loans could be the right choice for you. In this comprehensive guide, we will explore the credit criteria, loan structures, guidelines, and how to get the best rates from Capital One. Let’s dive in and find out if Capital One Auto Loans is the perfect fit for your needs.
Capital One Auto Loans Credit Criteria
Capital One Auto Finance offers a full spectrum lending program, catering to customers with various credit tiers. Previously, they offered their prime program to dealers, but now they focus on financing for customers with lower-level credit tiers, ranging from B to upper-level D. To qualify for a Capital One auto loan, customers in these credit tiers need to have a minimum credit score of 520.
Capital One Auto Finance has eight credit tier levels, each with its own credit score range:
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Tier 1: 730+ credit scores
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Tier 2: 660 – 729 credit scores
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Tier 3: 660 – 729 credit scores
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Tier 4: 660 – 729 credit scores
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Tiers 5-8: 520 – 659 credit scores
Determining which credit tier a customer falls into can be a bit confusing as Capital One utilizes a computer scoring system that takes into account various factors such as credit file, residence stability, and work history. Even their credit analysts sometimes struggle to explain why a deal was declined or approved.
Typically, to get an approval, customers should have at least five prior or current lines of credit that were well paid. Additionally, a longer credit history, preferably seven years, is preferred. While credit cards and a decent payment history may suffice, Capital One often prefers to see installment loan credit such as a previous auto loan or home loan, especially if the customer’s credit history is less than seven years.
Surprisingly, Capital One is willing to approve deals for customers with prior collection accounts, charge-offs, bankruptcies, and even prior Capital One collections and charge-offs. Their decision process is also impressively fast, with customers receiving an answer within 60 seconds, barring any unforeseen circumstances.
Capital One Auto Loans Structures
Capital One has tightened up their lending criteria, particularly in terms of the maximum front-end advance they allow, which is now in the range of 110%. This advance is based on factors such as a new car’s invoice, Kelley Blue Book wholesale value, or NADA wholesale value for used cars. For example, if a vehicle has a $10,000 wholesale blue book value, Capital One would be willing to lend $11,000 (110%) plus the additional costs such as tax, title, license, and approved back-end products like vehicle extended warranty, GAP insurance, and credit life and disability insurance.
Previously, Capital One allowed loans up to 145% of the total loan-to-value (LTV), including TT&L (tax, title, and license) and back-end products. However, they have now limited the LTV to 120% for better credit tier customers. This stricter structure can make it challenging to secure a no-money-down loan, especially if there is any negative equity from a trade-in that needs to be rolled into the new loan.
It’s worth noting that Capital One is also limiting their advances on select vehicles such as trucks and SUVs, so be prepared to put some money down. The maximum finance term is 72 months, and the length of the term is determined more by the mileage of the vehicle rather than the amount financed or the age of the vehicle. Other restrictions may apply, such as the advance percentage and overall credit history.
Is a Larger Down Payment the Key to Approval?
When it comes to Capital One auto loan approvals, it seems that customers with larger down payments have an easier time securing financing. A larger down payment signals to their scoring system a lower likelihood of repossession, which means Capital One will face a smaller loss in the event of repossession. So, if you’re looking for a higher chance of approval, consider putting 20% or more down on your vehicle purchase.
Discounts and Benefits of Capital One Auto Loans
Capital One offers additional discounts that can help borrowers save money. These discounts range from 0.15% to 0.50% and vary by state. Take advantage of the following discounts:
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0.50% discount when applying directly and setting up automatic payments through Capital One’s banking system.
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0.25% equity discount for front-end advances less than 90% of the invoice or wholesale book value.
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0.15% luxury loan discount for financing over $30,000.
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Shorter-term financing, such as 60 months or less, can also qualify for discounts ranging from 0.25% to 0.50%.
Capital One Auto Loans Guidelines
Before applying for a Capital One auto loan, it’s essential to be aware of the guidelines and restrictions set by the lender. Here are a few key points to keep in mind:
Vehicles That Do Not Qualify
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No motorcycles.
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No RVs.
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No private party purchases.
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No lease buyouts.
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No commercial vehicles.
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No vehicles for business use.
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No conversion, delivery, gray market, or lemon law vehicles.
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No salvaged, rebuilt, or branded title vehicles.
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No Isuzu or Daewoo vehicles.
General Conditions
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Must finance more than $4,000 for Tiers 1-3 and a minimum of $7,500 for Tiers 4-8.
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The maximum amount financed is $50,000.
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Loan-to-value (LTV) is limited to 120%.
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Payment to gross monthly income ratio should be less than 20%.
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Gross monthly income should be $1,500 or greater for Tiers 1-5 and $1,800 or more for Tiers 6-8.
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Vehicles over 120,000 miles are not eligible through the dealer, and if applying directly, the limit is 70,000 miles.
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Vehicles must be 10 years old or newer, or 7 years old or newer if applying directly.
How to Get the Best Capital One Auto Loan Rates
To ensure you qualify for the best rates from Capital One Auto Loans, follow these steps:
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Check your credit report and credit score to determine if you qualify for better credit tier rates. If your score is lower than desired, consider paying down credit card balances or settling collection accounts to improve your score.
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Negotiate a good deal on your vehicle purchase and put down 20% or more. This will likely qualify you for the 0.25% equity discount offered by Capital One.
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Opt for the shortest term that you can comfortably afford. Not only will this help you reach an equitable position faster, but it may also qualify you for additional interest rate discounts ranging from 0.25% to 0.50%.
Capital One Auto Loans Summary
In summary, Capital One Auto Finance offers competitive rates and terms for both new and used vehicles. With rates in the mid-4% to low-5% range, you can feel confident that you’re getting a good deal. While their rates for used vehicles are decent, customers with good credit may be able to find even better rates elsewhere. It’s always a good idea to compare auto lenders’ rates to ensure you’re getting the best possible financing terms.
It’s worth mentioning that Capital One does not offer auto loans for private party purchases or lease buyouts. However, they do provide auto loan refinancing options with competitive rates, which can be a great way to save money on your existing car loan.
If you’re ready to explore Capital One Auto Loans further, visit their website and bookmark it for future reference. Additionally, take advantage of the valuable car buying tips available on their site to save both time and money during your car buying journey.
Remember, conducting thorough research and comparing different lenders is essential to find the best auto loan terms that align with your financial goals.