New car buyers tend to see the credit score as the be all end all when trying to figure out what interest rate they should get, and with good reason. The credit scores is perhaps the most important factor used to determine what type of interest rate someone will get when applying for new car financing. Lenders use the credit score to determine the credit worthiness of the applicant; those with good credit scores get better interest rates because they are less of a risk while those with bad credit scores are given high interest rates because their bad credit history or lack thereof makes them more of a risk for the lenders.
After the credit score has been considered the lender will also look at a few other factors to help determine what your interest rate should be. One of the first things that a lender will look at aside from the credit score is how much the buyer put down as a down payment. Like the credit score most lenders use the down payment to judge how much risk they will be taking by lending an applicant some money. A large down payment puts more of the risk on the buyer’s shoulders while reducing the risk taken on by the lender. Some argue that this is not a good method of determining the interest rate for a buyer because some people do not have enough money in order to make an adequate down payment buy for lenders a buyer that doesn’t have money saved up to use as a down payment likely has trouble saving up money or is living paycheck to paycheck.
In addition to the down payment the amount of the loan is also used to help determine the interest rate. If a loan is small it can generally be paid off easier so it poses less risk to the lender but a large loan on the other hand will be much harder to pay off so the risk to the lender is increased. As you have probably already figured out the more risk a lender takes in issuing the loan the higher the interest rates tend to be. Most lenders need to satisfy a certain risk to reward ratio when issuing loans and as the risk increases so does the interest rate in order to increase the potential reward of the lender.
The length of the loan is also used by some lenders to help determine the interest rate on a loan since a long term loan tends to be harder to payoff than one that is shorter. The way lenders see it the longer the loan is for the more that can happen in that period that can cause the buyer to be unable to pay on the loan. If you are trying to get a car loan and the interest rate is higher than you would like trying to adjust the term of the loan is often a good way to get it dropped down a bit to a level that you are satisfies with.