Tips For Car Shoppers With Bad Credit

By Liz Opsitnik
Friday, Aug 21 2009 19:51

Auto Loan, Not the Car, is More Important if You Have Bad Credit

If you know you have really bad credit, all you need to focus on is the car loan, not the car. You can’t be picky about what car you buy because you will have a hard enough time just finding someone who will finance you. Get your credit score up first and shop around for the best interest rate for an auto loan. It still may be really high and you still may get a bad credit auto loan. But by getting your auto loan and paying on time, every month, you will be able to establish a better credit history so next time you can buy the car you want. Unfortunately, this is a situation that comes with having bad credit. It keeps you from buying what you really want.

If you plan on leasing your next vehicle, your credit score should be around the 680 and higher range. Most leasing companies won’t consider you unless you have a prime credit rating. They might also require you to put more money down at the lease signing so you are less of a risk to them.

Bad Credit? Try a Dealership That Only Finances High-Risk Borrowers

If you’ve been turned down for an auto loan at a traditional dealership, try going to a dealership that deals exclusively with high-risk borrowers. These types of dealerships exist solely for buyers in your situation. They are prepared to finance high-risk applicants, although it may be at a high interest rate. You have a much better chance getting approved there and in the process, you will be able to rebuild your credit.

Beware of used car lots that offer their own financing and promise to give loans when nobody else will. If you absolutely need a car and have no other options, these places can be a life saver, but you will pay an extremely high interest rate, usually more than 20%. If you’re just looking to upgrade your car, steer clear.

Confused or unsure about some of the car loan terms used in the article? Click here for our Auto Loan Glossary.