What’s your credit score? If it’s 620 or below, then you have subprime or “bad credit.” That doesn’t mean you can’t finance a car. Credit scores of 620 and lower are pretty common these days – so common, in fact, that many banks and dealerships have entire “special finance” departments dedicated to lending to consumers with less-than-perfect credit.
Of course, each lender has their own approval criteria, and they rarely – if ever – publish these. That’s where we come in. We allow you apply just once – online – and have you application matched to a lender ready and willing to fund your loan. We have hundreds in our network. That means fewer applications, fewer potential rejections, and a better, faster, more efficient financing process.
Get Approved to Finance a Used Vehicle Today, Bad Credit OK!
Special Considerations for Bad Credit Used Car Buyers
If you’re reading this, you’ve probably decided to finance a used vehicle already. That’s great! Used vehicles don’t depreciate as quickly as brand new ones, and that’s important. Why? Because, the interest rates on subprime auto loans are high. Just how high will depend on your specific credit profile, lender, and other factors. But you can expect to be paying at least 13% APR, if not higher. That’s pretty significant. For instance, if you financed a $12,000 vehicle for 48 months with no down payment at 13.9% APR, you would pay over $3700 in interest. Combine those rates with a steeply-depreciating vehicle, and you easily find yourself with negative equity in your car – owing more than it’s worth.
Financing That Won’t Break The Bank
In order to place yourself in the most financially secure situation possible, we recommend the following.
- Provide a 10% down payment at minimum, 20% if possible. This will not only make your application more enticing to lenders, it will minimize the risk of negative equity.
- Make sure you’re prepared to drive this vehicle until it’s paid off. Many people opt for 60-72 month financing, but trade in their vehicle after 2-3 years. The problem? Their trade-in is worth a lot less than they owe. This deficiency balance gets rolled into the new loan, leading to a downward debt spiral that’s hard to escape.
- Fight “The Fever.” We’ve all had it, the fever for a new car, truck, SUV, or motorcycle. This emotional response leads to impulse buying, and unaffordable debt payments. Your best defense? Bring a level-headed friend with you to the dealership. They can help you stave off the fever and make a reasonable, budget-friendly decision.
- Choose the shortest loan-term possible. Sure, this will make your monthly payments higher, but the shorter your loan, the less you’ll pay in total interest. This is also another good defense against negative equity.
How Much Should I Spend?
When financing a subprime car with subprime credit, it’s best to go with an economical vehicle with solid resale value. “Economical” being a relative term, let’s look at some specifics. Typically you can finance up to 50% of your annual income, but that doesn’t mean you should! It’s much better to spend between 10-30% of your annual income on a car. If you make $35,000 per year, this is just $3500 to $10,500. Sounds low, doesn’t it? It may seem that way, but you’ll rewarded with lower stress, more money in the bank, and better credit.
Ultimately, neither new or used cars are a very good investment. They are a necessity, yes, and they are an integral part of American culture. But they also lose their value quickly. You should think of financing a used vehicle as a way to rebuild your credit, as a paid-as-agreed car loan will go a long way in improving your credit score. Keeping your payments low will ensure that you make all of them on time and keep your credit on an upward path.