Looking for a reliable used vehicle with poor credit seems like an oxymoron – it's not! There are dealerships that finance reliable used cars for bad credit borrowers.
Poor Credit Borrowers
You don’t have to have the best credit to get into a reliable vehicle. There are subprime lenders and plenty of reliable used cars for poor credit, and no credit, customers.
Most traditional auto lenders – direct lenders at banks and credit unions and the captive lenders of carmakers – may turn you down if your credit score doesn’t meet their standards. It's also true that borrowers with good credit qualify for spanking new deals and the best rates, but that doesn’t mean you have to settle for a clunker simply because of your poor credit score.
Subprime lenders, also known as bad credit lenders, work through a dealer's special finance department. These lenders review your credit reports, but they also take a look at your income and overall stability during the auto loan approval process.
They don’t just rely on creditworthiness for car loan decisions. They help borrowers of all types get into a vehicle, and offer the opportunity to improve your credit for future loans. Subprime lenders report loans to the credit reporting agencies, so if you stay on top of the payments, you can improve your credit and raise your credit score.
It takes a little bit of work, but getting the needed items together for a subprime lender isn’t usually difficult. We’re here to list what you should round up when you’re preparing for poor credit financing, and the typical car requirements for a subprime loan.
Subprime Financing Requirements
All lenders are likely to vary in their requirements, but they generally need similar items to verify the information you listed on your credit application. These items commonly include:
- Proof of identity – A valid driver’s license that isn’t revoked, suspended, or expired.
- Proof of income – Proven with computer-generated check stubs, with a minimum monthly income of at least $1,500 to $2,000 before taxes.
- Proof of residency – Proven with a recent utility bill in your name and your address. Can also be proven with bank statements in your name and current address.
- Proof of a working phone – Proven with a recent phone bill, and must be a contract cell phone or landline phone.
- Down payment – Bad credit lenders usually require a down payment of at least $1,000 or 10% of the vehicle’s selling price. A trade-in with equity can also help meet this requirement.
- Personal references – If you’re approved for a bad credit auto loan, prepare to supply a list of around five to eight personal references with complete contact information (they can’t share your address).
After you’ve gathered your documents for verification, you can start to look for a dealership that works with subprime lenders, and think about possible car choices.
Used Car Requirements
Subprime lenders usually have limits on how much you can finance, as well as a minimum amount you’re required to finance. While you may not be able to get your dream car, this doesn’t mean you have to get a clunker, either!
For many bad credit lenders, a used vehicle needs to be less than 10 years old with fewer than 100,000 miles. The minimum amount you’re allowed to finance varies, but it typically needs to be at least $5,000.
While you may not get financed for the newest (or oldest) car on a dealer’s lot, you may still be able to qualify for a certified pre-owned (CPO) vehicle. When it comes to used cars, CPO vehicles are the best of the best.
These cars are inspected by a manufacturer-certified mechanic, come with a manufacturer-backed warranty, and are typically only a few years old. This is because many CPO vehicles are just coming off-lease. Since these cars are inspected, relatively new, and have lower mileage, they’re more likely to be reliable down the road – which can mean savings for you if they’re maintained.
Finding a Special Finance Dealership
Now that you’re prepared and you know what you’re likely to need when you’re working with a subprime lender, you can start looking for one! Subprime lenders work through a dealership’s special finance department, but how do you know which dealers have one?
Good news – we do! Here at The Car Connection, we’re teamed up with dealerships nationwide that work with poor credit borrowers and subprime lenders. Get matched to a dealer in your area by completing our free auto loan request form, and we’ll get to work!