Navigating the labyrinthine world of car dealerships and auto loans can be a daunting task, especially for individuals with less-than-perfect credit. But fear not, for this comprehensive guide will equip you with the knowledge and resources you need to secure the best possible financing for your next vehicle
Finding the Right Dealership
The first step in obtaining financing is identifying a dealership that specializes in working with borrowers who have bad credit. These dealerships, often referred to as “buy here, pay here” (BHPH) or “subprime” dealerships, understand the unique challenges faced by borrowers with less-than-stellar credit scores and are willing to work with them to find a loan that fits their budget and needs.
Here are some tips for finding a reputable BHPH dealership:
- Consult online reviews and resources: Websites like the Better Business Bureau (BBB) and Consumer Reports can provide valuable insights into a dealership’s reputation and customer satisfaction ratings.
- Seek recommendations from friends and family: Word-of-mouth referrals can be a great way to find a trustworthy dealership.
- Visit the dealership in person: Get a feel for the dealership’s atmosphere and the professionalism of its staff.
Understanding the Loan Process
Once you’ve identified a few potential dealerships, it’s time to delve into the specifics of the loan process. Here’s a breakdown of what you can expect:
- Pre-approval: Many dealerships offer pre-approval options that allow you to get a sense of your loan eligibility and terms before formally applying. This can be a helpful tool for understanding your options and comparing offers from different dealerships.
- Application: The formal loan application process typically involves providing the dealership with your personal and financial information, including your income, employment history, and credit score.
- Credit check: The dealership will likely perform a credit check to assess your creditworthiness and determine the interest rate and loan terms you qualify for.
- Down payment: Most BHPH dealerships require a down payment, which can range from a few hundred to a few thousand dollars. The amount of the down payment will depend on your credit score, income, and the value of the vehicle you’re purchasing.
- Interest rates: Interest rates for bad credit auto loans are typically higher than those for borrowers with good credit. However, BHPH dealerships often offer competitive rates compared to other lenders who specialize in subprime loans.
- Loan terms: The loan term, or the length of time you have to repay the loan, can vary depending on the dealership and the amount you borrow.
Tips for Securing the Best Deal
Take into consideration these pointers to make sure you’re receiving the greatest deal on your auto loan for bad credit:
- Shop around: Compare offers from multiple dealerships to find the most competitive interest rates and loan terms.
- Negotiate: Don’t be afraid to negotiate the interest rate, down payment, and other loan terms.
- Consider a cosigner: If you have a friend or family member with good credit, adding them as a cosigner can help you qualify for a lower interest rate.
- Make timely payments: Establishing a history of on-time payments can help improve your credit score and make it easier to qualify for better loan terms in the future.
Additional Resources
For further information and guidance on bad credit auto loans, consider these valuable resources:
- The Federal Trade Commission (FTC): The FTC provides comprehensive information on auto loans, including tips for avoiding predatory lending practices.
- The Consumer Financial Protection Bureau (CFPB): The CFPB offers resources and tools to help consumers understand and navigate the auto loan process.
- The National Consumer Law Center (NCLC): The NCLC provides legal assistance and resources to consumers who have been victims of predatory lending practices.
Even if you have poor credit, you can improve your chances of getting the best financing for your next car by using the resources and adhering to these tips. Always keep in mind that information is power, and with the appropriate knowledge and planning, you can handle the car-buying process with assurance and comfort.
Our top picks of timely offers from our partners
A less-than-perfect credit score can be a barrier to favorable terms on financing products, including auto loans. Fortunately, there are still lots of car loan options available to you even if your credit history contains some blemishes (think scores below 670). And comparing those options is key to getting the best deal you can.
Based on the kinds of loans they offer, their affordability, their credit requirements, and their shopping experiences, CNBC Select compared over a dozen auto loan providers. Here are our top picks for car lenders that serve customers with bad or fair credit. (Read more about our methodology below. ).
Best for used vehicle selection
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Annual Percentage Rate (APR)
Not disclosed
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Loan purpose
Used vehicles
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Loan amounts
Starting at $500
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Terms
36 to 72 months
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Credit needed
Not specified
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Early payoff penalty
None
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Late fee
Varies by state and contract
- Open to borrowers with bad credit
- No early payoff fees
- Prequalification available
- 100% online application process available
- Low minimum loan amount
- Allows co-borrowers
- Financing is only available for cars sold at CarMax
- Not available in all states
- Prices are non-negotiable
For those looking to purchase a used car and want access to a large inventory, CarMax Auto Finance is a viable option.
As the largest used-car retailer in the U. S. , CarMax also provides financing for the cars it sells. You have the option to complete the entire process online. There is no minimum score needed because CarMax can work with clients that have a variety of credit profiles due to their extensive network of financing sources. With no effect on your credit, you can use the retailer’s prequalification tool to receive customized terms, such as an annual percentage rate and monthly payments. You can also include a co-buyer which might help you get approved.
Additionally, CarMax provides a Three-Day Payoff program in the event that, within three days of closing your CarMax loan, you discover a better loan offer. Because of this, if you decide to use CarMax, it makes sense to shop around for financing, especially since its policy forbids price haggling.
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Annual Percentage Rate (APR)
Starting at 2.99%
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Loan purpose
Used and new vehicles, refinancing loans, lease buyout
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Loan amounts
$2,500 to $100,000
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Terms
24 to 96 months
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Credit needed
Not specified
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Early payoff penalty
None
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Late fee
Varies by lender
- Open to borrowers with bad credit
- No early payoff fees
- Prequalification available
- Wide loan amount range
- Allows co-applicants
- Loan approval may take up to 48 hours
- Loan funding can take up to two weeks
Autopay can be a great option for car owners who want to refinance their vehicle but have bad credit. Who is this for?
Because Autopay is an online platform, it can work with customers in a variety of credit situations because it partners with financial institutions that offer auto loans. Autopay provides a variety of refinancing products in addition to loans for new and used cars, such as lease-buyout and traditional refinancing with cash back.
You can prequalify with a soft credit inquiry and also have the option to add a co-applicant. Once pre-qualified, you can compare offers from multiple banks and credit unions to pick the best deal. In the event that you choose to proceed, the lender will examine your documentation for final approval and perform a hard credit check. This process might take up to two days.
The Easiest Way To Buy Cars In Your Business Name! (Multiple At ONE TIME!)
FAQ
What is the easiest car company to get financing?
What is the lowest credit score a dealership will accept?
What is the lowest amount a dealership can finance?
Is dealership financing a better deal?
While you will likely get an auto loan with a more competitive rate through a bank or credit union, there are instances where dealership financing could be a better deal. The dealer offers promotional financing, as low as 0 percent APR (annual percentage rate), on select new models when you finance in-house.
How do I get a car loan financed by a dealer?
There are three common routes you can take when getting your car loan financed by a dealer. Dealers often have relationships with banks and other lending institutions. With dealer-arranged financing, the dealer connects you with one of its lending partners, acting as an intermediary in the financing process.
Should a car dealer offer alternative financing?
Nevertheless, prepared consumers should always investigate alternative financing through the dealership. Car dealers have access to a broader array of financing institutions and options than the typical car buyer does, and it is possible the car dealer may find the consumer a loan with a lower interest rate and a lower payment.
Is a dealership a good place to get a car loan?
A dealership is certainly a convenient place to get an auto loan. You won’t have to fill out separate applications, and you can take care of it after you have found the perfect ride. But it frequently doesn’t make the most financial sense, especially if you have good credit and an established relationship with a bank or credit union.