Those with good credit usually don't have a problem getting financed, but buying a vehicle isn't as easy as walking into any dealership and expecting a loan when you have bad credit. So, then, what are your car buying options? You have three main ones you can try, and we break each of them down for you.
Option 1: Your Bank or Credit Union
The first place you should look for an auto loan is with your current bank or credit union. If you have a good relationship with them and have kept your account(s) in good standing, it’s possible they may pre-approve you for a car loan even if your credit score isn't great.
Even if they turn you down, you at least know that you need to look elsewhere to get auto financing.
Option 2: Special Finance Dealership
If you couldn’t get pre-approved, the next place to look is a special finance dealer. These dealerships are signed up with subprime lenders, who specialize in financing bad credit car buyers.
Subprime lenders look at your credit, but they also consider other factors such as income, down payment, and residence stability, to name a few. Specific qualifications differ by lender, but, generally, they require:
- A minimum income of $1,500 to $2,000 a month before taxes from a single source.
- A down payment of at least $1,000 or 10% of the vehicle’s selling price, whichever is less.
These lenders also ask for proof of income, proof of residence, a working phone in your name (but no prepaid cell phones), and a list of five to eight personal references complete with names, addresses, and phone numbers.
Make sure you tell your references you’re listing them, so that they’re not caught off guard if the lender reaches out to them to verify they know you.
Option 3: Buy Here Pay Here Dealership
If you’ve been turned down by your financial institution and a subprime lender, another option is to visit a buy here pay here (BHPH) dealer. These dealerships don't use outside lenders, they are the lenders! This means you buy a car and finance it all at the same place.
The biggest benefit these dealers offer is that they usually don't check your credit, which makes it easier for people with bad credit or no credit to get approved. What you qualify for depends on your income, and they also require a down payment.
A drawback to financing through a BHPH dealership is that they may not report loans or on-time payments to the major credit bureaus. This means you can’t improve your credit score with a BHPH auto loan.
You may also be required to make payments in person, which is where the name comes from. Make sure to ask about this and that you’re able to get to the dealer easily if this is the case.
Need Help Getting Started?
If you’re ready to buy a vehicle, The Car Connection wants to get you connected to the right dealership even if you're dealing with less than perfect credit. Thanks to our nationwide network of partner dealers, we take the hassle out of finding auto financing.
We match credit-challenged consumers to dealerships near them that know how to work through bad credit. Don't hesitate any longer if you need another car! Get the process started by filling out our fast, free, and no-obligation auto loan request form right now.