0 Percent Auto Loans Increase for Subprime Borrowers

Zero-percent auto financing options could be possible for some subprime consumers amid the COVID-19 pandemic. Call it a once in a lifetime opportunity, or a seldom seen fluke, but whatever the case, some borrowers with bad credit are reaping benefits of deals by taking out a loan amid a global pandemic – deals that normally wouldn’t be available.

Automakers Offer Unlikely Deals

0 Percent Auto Loans Increase for Subprime BorrowersMany automakers are offering unprecedented deals to keep sales up during the slump caused by coronavirus shutdowns. A few are even loosening the reins for lending to borrowers with far less than perfect credit.

In order to boost sales, many manufacturers are rolling out low-APR and 0% financing deals to prospective buyers. Most require financing through the manufacturer’s own captive lender, and offers vary widely between brands. One unique turn of events caused by COVID-19 situation is that deals are coming from both luxury and mass-market automakers, which opens up opportunities for people in many credit situations that were previously unheard of.

However, even though some credit-challenged consumers have been able to take advantage of these zero-percent new car deals, the majority of them are still going to those with the best credit. The percentage of subprime and non-prime consumers that are able to take advantage of these programs is climbing, though.

According to J.D. Power, approximately 4.5% of new car, 84-month 0% financing deals signed between March 1 and May 4 went to people in the lower credit score ranges. Zero-percent, 84-month car loans aren't the only thing being offered, either.

Landing a 0% Auto Loan

Does this mean you can land a no-interest financing deal right now? It may – if the car buying conditions, opportunity, and your credit situation all fall in line. That said, what does it take to qualify for a 0 percent interest rate as a bad credit borrower? The answer, unfortunately, isn't so cut-and-dried.

Typically, in order to take advantage of a 0% financing deal as a poor credit consumer, the stars need to align just right, and you have to be in the right spot at the right time (with no idea where or when this time and place are). In other words, your chances are normally very slim. And then came 2020, the year where hindsight is perfect, and the future isn't so clear.

Right now, it's a good idea to shop around for the deal that's right for you, even as a poor credit consumer. You can rate shop for an auto loan by applying with multiple lenders within a 14-day window. This minimizes the impact of hard credit checks done by lenders, making all these inquiries count against your credit score as one inquiry, instead of several.

Even if you're unable to find a 0 percent deal on a new vehicle, several automakers are also offering low-APR and payment deferral deals on select certified pre-owned cars, which are often a good choice for bad credit borrowers.

Getting Your Own Best Deal

Realistically, your chance of landing a 0% APR car loan with bad credit may be slim, but that doesn't mean there aren't deals to be had, even when your credit score leaves something to be desired. Due to the coronavirus pandemic, a lot of the preexisting notions we had about the auto industry are changing.

These changes, including how much of the buying process you can complete remotely, and possibly even the appraisal of a used vehicle, are things to continue to watch as you shop for your next car. Whatever the situation you find yourself in as a borrower, make sure you fight for the best deal on every auto loan.

To help prepare to take advantage of a deal you may not want to pass up, make sure you:

  • Know your credit. Look at your credit reports and credit scores, and know what's realistic when it comes to your credit situation.
  • Build and stick to a budget. Don't be a payment shopper. Instead, look at the overall cost and balance monthly payments and loan terms to fit what you can afford. Don't try to squeeze yourself into a budget that you can't keep up.
  • Shop for an affordable, reliable vehicle. Now isn't the time to finance your dream car.
  • Work with the right type of lender. Not all lenders are willing to finance vehicles for people with poor credit. Working with a subprime lender could help.

Start Here

At The Car Connection, we provide auto loan insight, best practices, general vehicle information, and knowledge to meet all your car buying needs. We can even help you start on the path toward your next auto loan. Once you've done your research and are ready to get the car buying ball rolling, let us help take the stress out of finding a dealership that works with subprime lenders.

It's easy to get started for free, and there's never any obligation to buy. To find a local dealer that’s signed up with lenders for all kinds of borrowers, just fill out our simple auto loan request form. Then, we'll get to work connecting you with a dealership that knows how to help.


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