In today’s dismal economic woes, buying a car with bad credit may seem to be, at best, a bad deal for you, the consumer. However, as they say, when you’ve got lemons, make lemonade. Today, there are probably as many
people with bad credit as there are those with good credit. So it’s time to assess your advantages and make them work for you. You can’t disregard the disadvantages of a bad credit rating, but at the same time, you can make the most of what you have in your favor. Your length of employment at your current job can be a definite plus. In the same vein, if you’ve banked with the same bank for some years, and have a pretty clean record in terms of overdrafts, have direct deposit and a savings account with regular deposits, these points all work in your favor. If you belong to a credit union, this is another plus.
When buying a car with bad credit standing between you and a lender, remember that they’re in the business of lending money for a profit. Some things never change. The blunt truth is they’re in business to make money. If a lender has sufficient data to deem you a reasonable risk, you can most likely get a loan. Consider too, that, when buying a car with bad credit, the vehicle title remains in their name until the loan is repaid. In other words, the car serves as collateral. Should you default, they can repossess the car and auction it off for the balance of the loan. This is their last road of resort, but in the end, they recover their money.
This means that you should talk to lenders with whom you already have an existing relationship first. They are most likely to give you an auto loan at the best rate. If you can arrange a commitment for an auto loan, this opens the door to the widest venue of buying options. You can buy from a private party, a used car dealer or a manufacturer’s dealership for a new or used car.
When buying a car, with bad credit as the down side, you want to make your prospect as a loan candidate as attractive as possible to a lender. One way to accomplish this is to put down a large down payment. The lender then knows that you have a vested interest in keeping your car and making good on the remaining balance of the loan. If you have a second car to solve transportation problems in the short term, sell your current car on the private market and use the sales amount to fund your down payment. You’ll be money ahead on interest and a shorter, smaller loan payment.
Be aware that banks won’t loan on a car that’s more than 9 years old. The auto financing companies that used car lots work with will, but you’ll pay a heavy price on the financing. This route is not generally a smart deal.
In summary, buying a car with bad credit isn’t really all that difficult. What’s difficult is finessing your strategy to benefit you. Now you know the ropes!