Did you know that there’s more than one kind of bad credit car dealer? There are subprime lenders that work through special finance dealerships, and in-house financiers found at buy here pay here car lots. Both can get you bad credit auto financing, but each has different requirements you need to meet to qualify.
Special Finance Car Dealers
Special finance dealers have subprime lenders available to help credit-challenged consumers. These subprime lenders look at other factors outside of your credit score to determine approval, but they still check your credit reports and score. These lenders look at factors such as:
- Income – Can you afford a bad credit auto loan? Lenders ask for a certain amount of minimum income and proof of that income, so you have to bring in a computer-generated pay stub showing your year-to-date income.
- Residency – Do you have a stable residence? Bring in a copy of a recent utility bill in your name at the address listed on the application.
- A phone – Can a lender get in touch with you? Lenders need to know that you can be reached at any time. Proof of a working landline or a contract cell phone in your name is a must, usually with a phone bill in your name.
- Down payment – Are you willing to invest in your loan? Subprime lenders typically ask that you make a down payment of at least $1,000 or 10 percent of the vehicle’s selling price, whichever is less.
When you take out a subprime auto loan, you get the chance to help improve your credit over time. As long as you’re on time with each payment, you should see your credit score improve. Then, you may be able to refinance for a better rate in a couple of years, and even qualify for a traditional loan the next time around.
Buy Here Pay Here Car Dealers
Another type of bad credit car dealership is a buy here pay here (BHPH) lot. BHPH dealers loan in-house, and can get you the vehicle and the financing you need all in one place.
It’s easier to qualify for a bad credit loan from a BHPH dealership because they don’t run credit checks. Instead, they base approval on your income and down payment.
However, because they don’t run your credit, many don’t report loans or on-time payments to the credit bureaus. This means that this type of auto loan doesn’t help you improve your credit.
Also, because these dealers may want to cover the cost of the car, the down payment requirement could be over 20 percent, depending on the vehicle you pick.
You should also be aware that the car selection can be limited. Vehicles on these lots tend to be older and come with higher than average mileage. This doesn’t mean they’re in bad condition, it just means you definitely should have them looked at by a certified mechanic and run a VIN check before you buy.
Find Bad Credit Car Dealers With Us
As for where to find the best bad credit car dealership for your situation, The Car Connection is the place to start. We work with dealers all across the country that are ready to help credit-challenged car buyers get financed.
Fill out our auto loan request form, and we'll work to connect you to a dealership near you. Our service is free, easy, and comes with no obligations, so you can get started with confidence today!