Auto loan denials reached a record high in 2024, leaving many drivers stranded.
The 12-month rejection rate for auto loans hit 18.5% in June 2024, according to the Federal Reserve Bank of New York. This was the highest auto loan rejection rate since the Fed began tracking this data in 2013. Access to auto credit has improved since then — the rejection rate is down to 6.7% as of June 2026 — but qualifying for an auto loan is still more difficult than it was five years ago, when rejection rates dipped as low as 1%.
High auto loan interest rates, budget-stretching car payments and loan delinquencies can cause lenders to tighten credit out of concern that more people will default on loans.
If you're dealing with auto loan denials and wondering where to turn, here are some suggestions.
Find out why your car loan was denied
Under the Equal Credit Opportunity Act, lenders are required to provide an adverse action notice within 30 days listing the reasons your loan was denied or details about how to request those reasons within 60 days. If you don’t receive such a notice, ask for it.
Even if you meet a lender’s minimum income requirements, your loan could still be denied for other reasons, such as having a short or inconsistent work history, or little to no credit history. Having a high debt-to-income ratio — the amount of debt on credit cards, other loans or a mortgage compared with the amount you’re paid — is another possible reason for loan denial. Also, a loan application could be declined for something simple like incorrect or missing information in your application.
Knowing why your loan was declined can be a starting point to overcoming those obstacles.
Save for a car down payment
Caleb Cook, vice president of consumer lending at Digital Federal Credit Union, said in an email that “saving for a down payment can be just as important as working on improving your credit score.” He added, “Having a down payment certainly helps if you’re credit-challenged from an underwriting perspective, and often may be required by the lender.”
The recommended down payment amount for a car is 20% for new and 10% for used — that means, based on current average car prices, a saver would aim for about $10,100 for a new car and about $2,700 for used. For a person with financial challenges, saving these amounts can be difficult.
In some states, residents can save and receive matching funds (up to a certain amount) for a car purchase using a type of savings account called an Individual Development Account (IDA). IDA availability and allowed usage vary by state, and the social service agencies that administer IDAs may have their own requirements.
Most IDAs have strict eligibility requirements, and a person has to remain in the program for a period of time to receive matching funds, according to Laura Yepez, program manager on the ecosystems change team at Prosperity Now.
“Matches would typically be $1 to $1 but could go as high as $3 to $5 [per dollar saved]. Incentivized savings make it easier to reach goals, and most programs have a financial coach that meets with participants to help create and track goals,” Yepez said in an email.
Look into car-buying programs with low-interest loans
While they aren’t abundant, car-buying programs with low-interest loans do exist through nonprofit organizations in certain areas. These programs focus on vehicle ownership as one component of long-term financial stability, so there is usually a financial coaching requirement. Also, participation is limited. Here are two examples:
Goodwill Cars to Work
Who it serves: Residents of Kentucky.
Requirements: Participants must be employed for a minimum of 90 days, meet income restrictions and show their ability to handle car-related expenses. Participants must also have savings equal to half the vehicle's down payment, which Goodwill will match with $500 ($1,000 for Goodwill employees).
What it provides: Financing for reliable vehicles through a partnership with a local credit union and automotive group. Financing terms are tiered by credit score. Scores from 580 to 700 qualify for standard low-interest financing; scores from 500 to 579 require additional budget verification and financial coaching; scores below 500 may be eligible on a case-by-case basis with longer financial literacy training. Participation includes a one-year AAA membership.
Vehicles for Change (VFC)
Who it serves: Residents of Maryland.
🚨Nerd Alert: As of late 2026, VFC has paused new applications for its Keys to Independence program. The program is expected to reopen in spring 2027.
Requirements: Participants must be working 30 hours a week, meet income restrictions and show their ability to handle car-related expenses. Credit score isn't a consideration.
What it provides: A referral by partner agencies for a low-interest, 12-month loan. Donated cars are made road-ready by Automotive Service Excellence-certified mechanics at the VFC Full Circle Training Program, which provides auto technician training for individuals with employment barriers. Ongoing car maintenance is available through Full Circle at a reduced cost.
Use caution with 'buy here, pay here' car dealerships
Buy here, pay here (BHPH) dealerships sell used cars and provide financing for people who can’t get loans elsewhere. The interest rates for this financing are among the highest, and cars may have tracking devices to prevent them from starting if payments are behind.
BHPH dealers may be the only option for some people, but be cautious and ask questions to find reputable dealers. If your only option is a BHPH dealer, make sure your car will be covered by at least a 30-day/3,000-mile warranty and request a vehicle history report. Read your loan paperwork before signing to be clear about the interest rate and monthly payment you’re agreeing to. Look for discrepancies or hidden fees, and ask if on-time payments will be reported to the credit bureaus to help you build credit.
