If a car loan is denied, first review your credit report for errors and dispute inaccuracies. Explore alternative lenders like credit unions or online financial institutions, which may offer more flexible terms. Consider a cosigner with strong credit or save for a larger down payment to reduce the loan amount and interest rate. If immediate financing is impossible, delay the purchase and focus on improving your credit score through timely payments and reducing debt.

The denial often stems from factors like poor credit history, high debt-to-income ratio, or insufficient income. According to the Consumer Financial Protection Bureau (CFPB), 25% of consumers who apply for auto loans face denials, with credit score inaccuracies contributing to 15% of rejections. A FICO score below 600 significantly lowers approval chances, as lenders view such scores as high-risk. For example, Experian data shows borrowers with scores below 600 pay 2-3% higher interest rates, making loans less affordable. Alternative lenders, such as credit unions, offer lower rates (e.g., 5-7% APR) compared to traditional banks (8-12% APR), according to the National Credit Union Administration. A cosigner with a score above 720 can boost approval odds by 30-40%, per myFico research. Saving a 20% down payment reduces loan term and interest costs, as noted by the Federal Reserve, which found larger down payments correlate with lower default rates. Delaying the purchase allows time to improve credit; a 100-point score increase can qualify for prime rates, saving thousands in interest over five years.