JoshBuying a new car is an exciting step, but it can be challenging if you have poor credit. Many people rely on cars for everyday activities and really can’t risk being without one. A low credit score can make it seem almost impossible to get a good deal on a vehicle. If you can’t buy a new car then there could be a domino effect that impacts your life in many ways.
Even with poor credit, you can buy a new car by financing it and have a reliable mode of transportation. It may not be exactly easy but it is doable to get behind the wheel of a car with poor credit. In this article, we will go over several tips that will help you pull it off.
Explore the finance options available to you
When you have poor credit, finding the right financing for a new car can be intimidating. However, several options are available that can suit your situation. Bank loans are a common choice, but they often require a good credit score. If your credit score is low, banks might not approve your loan.
Another option to consider is auto finance companies. These companies often specialize in providing loans to people with poor credit. They understand your situation and can offer solutions that banks and credit unions might not.
In-house financing, offered directly by car dealerships, is also worth considering. These dealerships finance your car purchase themselves, which can be an easier route if traditional lenders have turned you down. The reason this is such a good option when you have poor credit is the fact that many dealers don’t run a credit check except to verify your personal information.
Choose the right dealership
Finding a dealership that caters to customers with bad or no credit is a crucial step in purchasing a new car when you have poor credit. Many dealerships understand that not everyone has a perfect credit history. Yet, they still want to sell you a car.
Start by doing online research to identify dealerships in your area that advertise bad credit or no credit financing options. You can also ask friends or family for recommendations, especially if they have been in a similar situation.
Understand subprime loans
Subprime loans are a type of loan offered to individuals with poor credit scores, typically below 670. These loans are considered high-risk for lenders and often come with terms that are less favorable than standard loans, mainly their higher interest rates.
Since lenders view borrowers with poor credit as more likely to default, they charge higher interest to offset this risk. This means that over the life of the loan, you will end up paying more for the car compared to someone with a better credit score. However, that might be worth it to not only get a reliable new car, but also to rebuild your credit. Just make sure to read the loan agreement carefully and understand all the terms and conditions.