What Credit Score is Needed to Buy a Car at Carmax


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When you want to finance a car, one of the main issues you’ll grapple with is wondering whether you have the credit score for it. Your credit score can mean getting some of the best financing deals on the market or no offers at all, depending on where it stands. If you’re looking to buy a car at Carmax and aren’t sure whether your credit score is up to par, you’re in the right place.

The credit score needed to buy a car at Carmax is usually 600 and above, though Carmax hasn’t set a minimum requirement for qualifying for financing. Still, individuals with credit scores lower than 600 may be eligible for financing thanks to partnerships with third-party lenders.

Read on for an in-depth discussion on why credit scores matter when buying a car, whether Carmax finances bad credit, how your credit score affects your financing deal, how to secure financing with bad credit, and so much more. You’ll walk away with a definite answer!

Why Credit Scores Matter When Buying a Car

Generally, your credit score indicates your current financial status and your financial history. Financial institutions use it to assess the risk of financed purchases like homes, credit card purchases, and cars. 

Typically, credit scores have a range between 300 and 850. Depending on your score, you may fall into one of the following tiers:

  • Super prime: 781 to 850
  • Prime: 661 to 780
  • Non Prime: 601 to 660
  • Subprime: 501 to 600
  • Deep subprime: 300 to 500

Several factors may affect your credit score, though the most significant are:

  • The size and type of your debt
  • Public records, such as judgments and liens
  • Whether you make payments that are on time and how often you make late payments
  • The age and number of your credit accounts
  • Queries created by your credit application

A high credit score lowers the risk financial institutions have to take when lending you money, translating to more favorable loan terms and interest rates. So if you have a high credit score, it’ll be easier and less expensive to finance a car purchase. If your score is low, there are car rental companies that don’t require a credit card if you are dire for transportation temporarily.

Now that you understand why your credit score matters when buying a car, let’s zero in on Carmax and learn what credit score you need to buy a car with this company.

A Quick Overview of Carmax

Carmax is the biggest used car retailer in the US in terms of the number of cars sold. It’s headquartered in Richmond, Virginia, and dates back to as early as 1993. The company is famous for providing creative ways to help consumers across the entire credit spectrum secure financing for car purchases through Carmax Auto Finance (CAF).

Contrary to common belief, CAF isn’t Carmax’s umbrella for auto financing options. Instead, it’s more of the car retailer’s own lender. CAF is vertically integrated with Carmax and is one of the car retailers’ main assets for lending car shoppers with not-so-great credit profiles. There are other ways how to get pre-approved for a car loan when you have bad credit.

Heads Up: Note down the relationship between CAF and Carmax. It’s crucial to our discussion because it explains how and why Carmax can finance shoppers with bad credit, which we’ll cover in the next section.

What’s the Minimum Credit Score Needed To Buy a Car at Carmax?

Carmax hasn’t set a universal minimum credit score requirement for car loans. It’s not the only company that operates with no such restrictions, too. There are no universally accepted industry standards that stipulate the minimum credit score individuals need to qualify for a car loan. Each auto lender can come up with its own policies for evaluating your creditworthiness.

Does the lack of minimum credit score requirements mean that anyone can qualify for a Carmax Auto Finance Loan? Well, not exactly.

Even though Carmax doesn’t have a minimum credit score requirement, your credit score will determine whether you qualify for a loan and the terms you get if you do. The credit score needed to buy a car at Carmax goes through an evaluation. The car retailer evaluates your eligibility for financing based on four factors:

  • Your credit history
  • Your application information
  • How much you can afford to pay upfront as a downpayment
  • The car you want (i.e., its mileage, age, and price tag).

The better you perform on these four merits, the higher your chances of qualifying for approval, friendly loan terms, and a better interest rate.

If wondering should you get a Carmax pre approval the answer is yes. But since today’s discussion is all about credit scores, we’re only interested in one of these four factors: your credit history. In a nutshell, the higher that you rank on the credit score tiers, the better the deal you’ll get. 

minimum credit score for buying a car at Carmax

Depending on your credit score, you may qualify for financing from CAF or one of the many lenders Carmax has partnered with. These third-party lenders include Ally Auto, American Credit Acceptance, Capital One Auto Finance, Chase, Exeter, Santander Consumer USA, Wells Fargo Auto, and Westlake Financial Services. Partnering with these third-party lenders helps CAF accommodate buyers with varying credit scores.

Here’s an in-depth look at how CAF financing works for buyers in the various credit tiers:

Super Prime Credit (781 to 850)

Car shoppers in this credit tier have exceptional credit scores and usually get the best interest rates at Credit Unions: typically well below 10%. Most customers are aware of this and often prefer to secure their loans from their preferred credit union when financing a car purchase at Carmax.

Prime Credit (661 to 780)

Car buyers in this credit tier usually finance through commercial banks like Wells Fargo and Chase. Traditional banks have a thorough understanding of this auto loan segment and usually pay auto dealers referral fees to channel customers their way. Carmax has been partnering with lenders of this type for many years to accommodate buyers with prime credit.

Non-Prime Credit (601 to 660)

Non-prime credit is considered slightly challenged. Carmax partners closely with Specialty Finance companies specializing in auto loans to help car buyers in this credit tier secure financing. In this credit segment, the lenders’ main concern is to ensure that customers don’t purchase cars that depreciate too quickly or have too high monthly payments. Additionally, there are ways how to repair your credit yourself if you are in this tier.

Subprime and Deep SubPrime Credit Tiers (<600)

This section explains why understanding the relationship between Carmax Auto Finance and Carmax is so essential to our discussion. You see, these two credit tiers carry the highest risk of loan default. Thus, lenders working with car buyers with credit scores in the subprime and deep subprime credit tiers segments need to be closely related to the car dealer. In the case of Carmax, this lender is Carmax Auto Finance (CAF).

CAF is vertically integrated with Carmax, and is why both companies can jointly offer loans to individuals with bad credit. How does vertical integration help?

Instead of confusing you with definitions, here’s a real-life example of how vertical integration works: Apple makes iPhones and computers and iPads, all electronics that require software to run. Instead of outsourcing software development to a third party, it uses an in-house development team to design software for their electronics. That’s vertical integration in action. 

  • Back to Carmax and Carmax Auto Finance: Carmax sells cars, and buyers often need financing. Instead of relying solely on other lenders to finance their customers, the company uses CAF to do that.

But since the risk of loan default is typically high in the subprime and deep subprime tiers, CAF needs labor-intensive collections, loan servicing, and repossession departments, which Carmax helps with. This way, both Carmax and CAF increase their recovery rates in case of a loan default, allowing them to take their chances on individuals with challenged credit scores. Look into Kiplinger’s Personal Finance vs. Money Magazine for such topics covered.

What Credit Scores Does Carmax Prefer?

It’s one thing for a car retailer to claim to have the capacity to finance car buyers of all credit score tiers and an entirely different thing to do it. So, does Carmax finance customers of all credit tiers, or do they have a preferred credit range? 

Knowing the answer to this question can be a handy way to gauge your chances of getting approved for a loan by Carmax Auto Finance, and the only way to do that is to look at the numbers. 

Carmax Preferred Credit Scores

Looking at the most recent Carmax Auto Finance Loan Portfolio Report, one exciting observation stands out: the most recent loans were issued to Prime credit car buyers with a FICO score of 715. Up to a third of Carmax Auto Finance loans are non-prime, one-third prime, and the other third super-prime. 

Based on these observations, it’s clear that you’re most likely to qualify for financing with CAF if you have a credit score of 600 and above. If you are lower than this, check out quick hacks how to improve your credit score to secure a credit score needed to buy a car at Carmax.

What About a Pre Approval?

When you visit the car dealership Carmax, request pre-approval from them before looking at vehicles. This process is straightforward.

How Much Will Bad Credit Affect Your Car Loan at Carmax?

We’ve already established that the best financing deals at Carmax fall to individuals with credit scores in the prime tier and above. But what does that mean for people in lower tiers? Just how much of an impact will their challenged credit score have on their loan deal?

Bad credit affects one key element of your loan deal: the interest rate. As a general rule, the lower your credit score, the more you’ll pay in interest. Carmax Auto Finance has several interest categories that determine your loan’s applicable rate depending on your credit score.

will bad credit affect your car loan at Carmax
  • Individuals with excellent credit scores (prime and super-prime tiers) get the most favorable interest rates of 3.15% to 4.5%, while those with challenged credit score profiles have to make do with rates as high as 14% to 24%.
  • The middle category is reserved for people with average credit scores. People in this category pay 4% to 18% in interest.

As you can see, your credit score will significantly impact the interest rate you get. If your credit score isn’t where you want, don’t throw in the towel yet. There are several things you can do to get a better rate. 

Let’s review what those are in the next section.

How To Purchase From Carmax With Bad Credit

Don’t have the best credit score or the time to wait for it to improve? Here are some of the things you can do to increase your likelihood of qualifying for a decent financing deal at Carmax.

Make a Large Down Payment

Making a sizeable down payment is one of the surefire ways to get competitive financing terms. It can help reduce your monthly payments, the duration of your loan, and the interest rate. 

Even if you have a challenged credit profile, you can lower your interest rate by paying more upfront. Why? Because of the more significant the portion of the total car price you can cover upfront, the less you’ll need to borrow, which lowers the lender’s risk. The lower the lender’s risk, the more likely they’re to give your favorable terms, including a lower interest rate. Be sure you know outstanding balance vs. principal balance differences for your loan.

how to purchase from Carmax with bad credit
If you are purchasing from Carmax with bad credit, be sure to make a large down payment

For a car that’s not too old, aim to cover at least 20% of the total cost with your down payment. Not only will such a downpayment help you get favorable loan terms, but it also comes with the added benefit of shielding you from depreciation. 

All cars depreciate: there’s just no way around that. Most cars will lose about 20% of their value within the first year and depreciate some more every year after that.

  • With a downpayment lower than 20%, you might end up “upside-down” on your car loan. Being “upside-down” means you owe more on your auto loan than the car’s actual worth. If you were to sell the vehicle in such a predicament, you’d need to put together some money to cover the deficit between the selling price and the loan balance. Nobody wants that.

If you’re eyeing an older car, you can pay 10% upfront. In most cases, this will be enough to eliminate the risk of being upside down on your auto loan because a used car will already have experienced a bit of depreciation. But if you can manage to pay more, then do so by all means because that’ll help lower your interest rate even more. 

Enlist a Cosigner With Good Credit

Enlisting a cosigner with an excellent credit score is another way to improve your chances of getting approved for an auto loan. It can also help you get a better loan deal in terms of the interest rate and the repayment period.

By definition, a cosigner is a person who agrees to apply for a loan with you, agreeing to pay the lender in total if you default your car payments. Ensure you budget paycheck to paycheck so you won’t default. Such an agreement can be a huge money saver when you have bad credit because having someone else hold you accountable if you default your payments means lower risk for the lender. 

When a lender doesn’t have to take too much risk on you as a borrower, they’re likely to approve your loan request, possibly with better terms.

Do Your Research

Doing your homework can also help you get a good financing deal. As part of your research, go online and research the car you’re eyeing and how much it costs. Next, read up on the car buying process to get an idea of how to go about buying a used car. Better yet, get pre-approved to get a better idea of how much you’ll spend on the vehicle you’re looking to buy.

It also helps to have a predetermined budget. If you’re not sure of the exact figure to set aside, use Carmax’s online calculator. Key in different numbers like the down payment amount, vehicle price, APR, and monthly payment to get a better idea of how much you’ll pay.

This kind of groundwork will help you determine how much you can pay upfront and the amount you need to finance. It’ll also put you on the same page as prospective lenders, which can help speed up the process of choosing the best financing option.  

Check the Age and Mileage of the Car You’re Looking To Purchase

A car’s mileage and age will affect your financing options. More often than not, lenders are unwilling to offer longer terms on some older cars. Newer vehicles with low mileage tend to get the most competitive loan terms in terms.

Being already at a disadvantage due to bad credit, the last thing you want is to have your car’s age and mileage make it harder to secure a favorable financing deal. Instead, you want to do everything to give yourself the best chances, which involves choosing a reasonably new car with low mileage.

Related Questions:

Can I Buy a Car at Carmax with No Money Down?

Buying a car at Carmax with no money down is possible but not always easy. Most people get a loan to buy a car at Carmax because of how their financing deals are structured; they’re such that you need to put down some cash to secure one.

However, there are times when an approval comes through without having to put anything up upfront as long as you’re willing to pay a higher interest rate. You can create a personal balance sheet to budget your payment.

But if you have good credit, it’s possible to request that your payments be deferred for up to ninety days after the purchase of the car. This way, you can raise cash to complete the payment without putting anything down and still be able to drive away with a new car.

How Does Carmax Appraise Cars?

Like all used car dealers, Carmax needs to assess the value of a used car they’re considering buying from a customer. They have an entire process for that, which involves appraising each vehicle before purchase. 

Summing Up

In a nutshell, we’ve established that Carmax doesn’t have a minimum credit score requirement for people looking to finance their car purchases. Thanks to the vertically integrated lending subsidiary known as Carmax Auto Finance and partnerships with various auto lending organizations, Carmax can accommodate the financing needs of the different credit score tiers. 

With that said, Carmax Auto Finance’s loan Portfolio data shows that most financing deals in the recent past were issued to holders of credit scores in the non-prime tier and above.

BG Vance

For over 20 years, BG Vance has been a leader in public and personal financial management. He's developed and managed public budgets in excess of hundreds of millions of dollars. He is passionate about the FIRE movement and was featured in the Detroit News in 2001 about saving for retirement. Through the years, he's assisted families and individuals with getting their finances on track. He holds an MPA, is a licensed Realtor, and is currently working on a book about personal finance.

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