Good driver, poor credit: What makes your car costs so high

Car owners with poor credit can pay hundreds — if not thousands — more to drive than those with good credit. This plays out in two important ways: higher rates on car loans and, in most states, higher insurance premiums. In fact, having bad credit can raise your insurance quote even higher than if you'd had an accident.

Drivers with blemished credit often choose a cheaper car than they could otherwise afford. However, they'll still pay more to own it — especially if they finance the purchase, because they are charged higher interest rates.

For used-car loans in the last quarter of 2017, prime credit buyers received an average rate of 5.48 percent, according to credit reporting agency Experian. The average rate was much higher, 16.27 percent, for subprime borrowers.

Say a buyer purchases a used car with a loan of $21,000 — just under the average amount financed on used-car purchases, according to Edmunds. Using the average rates above, here's about how much each borrower would pay on a 48-month loan:

•Prime: $488 per month and $2,433 in total interest

•Subprime: $598 per month and $7,706 in total interest

In this example, the cost of poor credit is $110 per month, and $5,273 over the life of the 48-month loan.

And to get a lower monthly payment, buyers increasingly accept loans with longer terms — about 42 percent take out loans for six years or more, according to the Consumer Financial Protection Bureau.

While there's merit in making sure bills fit your budget, this dramatically increases the cost of a car.

The credit scores lenders use to determine loan terms are not the same score auto insurers use to set your premium.

A credit-based insurance score is used to predict your likelihood of filing a claim in the next few years, says Lamont Boyd, insurance industry director of scores and analytics at FICO. Insurers can use this and other scoring models to help set rates in all states except California, Hawaii and Massachusetts, where the practice is banned.

To get the best rate possible, before heading to a dealership, check your credit scores and get preapproved for an auto loan. You can still get financed on the spot, but "now you have this pretty strong negotiating chip to help you get an even better rate from the dealer," says Delvin Davis, senior research analyst at the Center for Responsible Lending.

And even with splotchy credit, you still could save by shopping around for car insurance quotes. In New York, for example, we found a $1,219 (per year) difference between the lowest and second-lowest quotes for poor credit — and a $5,689 difference between the highest and lowest.

You can also improve both your credit and credit-based insurance score by:

•Paying all your bills on time

•Keeping credit card balances below 30 percent of the limit