It can be difficult to tell which dealerships have special financing departments. Driving from one end of town to the other and applying for a car loan at every dealer you come across isn't a good way to qualify for an auto loan, especially if you have bad credit. We know what it takes to find a special finance dealership with the right type of lenders for credit-challenged borrowers.
What Makes it a Special Financing Dealership?
Special financing dealerships aren’t as limited as you may think. Special financing can be found at many different types of car lots, from franchised dealers to independent and buy here pay here (BHPH) lots.
At franchised and independent dealerships, special financing departments are teamed up with third-party lenders, called subprime lenders, that can help borrowers in many types of credit situations, including bad credit. Not all dealers work with the same lenders, so it can be hard to tell which dealerships to go to.
BHPH lots use in-house financing, because rather than use third-party lenders, the dealer is the lender. Because of this, these lots are often used by people that need special financing, but the process is different than applying with a subprime lender.
Subprime lenders are different from traditional lenders because they look at factors in addition to your credit score in order to consider you for auto loan approval. These factors must be proven, which means it's best to get prepared ahead of time before you go to a dealership.
All lenders vary in their requirements, but you generally need to provide:
- Proof of income – Your most recent computer-generated check stub, showing year-to-date income of at least $1,500 to $2,000 before taxes from a single source.
- Proof of residency – A utility bill or bank statement in your name, showing the address listed on your car loan application.
- Proof of a working phone – Lenders need to be able to contact you. Bring a recent contract cell phone or landline phone bill, and the address listed must match your application.
- A valid driver's license – Cannot be revoked, suspended, or expired. This serves as proof of identity, and allows you to drive a vehicle off the lot.
In addition to the items listed, you can expect to provide a list of personal references and a down payment. Lenders usually require around five and eight references with complete information (name, address, phone number, and email). Down payments are typically a minimum of $1,000 or 10% of a car's selling price, sometimes whichever is less.
Keep in mind that not all special financing dealerships are traditional dealers, some are actually buy here pay here lots with in-house financing. At these dealerships, the person selling you the vehicle is also the person financing it. These dealers don't usually check your credit at all, which makes a BHPH lot an appealing option for those who fail to qualify with a subprime lender.
All the cars at a BHPH dealership are used, and you can expect to make a hefty down payment. Also, your interest rate may be higher than you'd expect, and you may be required to come to the dealer every week or two to make the payments in person.
Additionally, because they don't always check your credit, many BHPH dealerships don't report your timely payments to the credit bureaus. All BHPH lots differ though, so it's important to find out what they require, how they accept payments, and whether they report to the credit bureaus before signing a contract.
Shopping for Your Deal
You could go to any car dealer in your area to try to get the loan you need if you have poor credit, but every time a lender looks into your credit, your score drops a few points. However, if you're shopping for the best interest rate and loan term, you need to be able to compare deals. To do this and make as little impact on your credit score as possible, you should apply for a loan within a two-week period (14 days), known as the rate-shopping window.
If you stick to this time frame for finding your next auto loan, the hard inquiries made by lenders only count against you as one credit check instead of several. Rate shopping can still be frustrating as a bad credit borrower, though, because you're most likely trying to find the best deal out of a handful of deals that have higher interest rates.
Ready to Get Started?
At The Car Connection, we know how difficult it can be to find the right dealership for your situation, especially if you're struggling with credit issues. We want to help alleviate your stress by connecting you to a local dealer that has the special financing you're seeking.
We work with a nationwide network of special finance dealerships that are teamed up with lenders that can help people in all sorts of challenging credit situations. Don't wait to get the ball rolling on your next car loan. Simply fill out our free, fast, and no-obligation auto loan request form, and we'll get to work for you!