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How to Buy a Car With Bad Credit

by John Milton
How to Buy a Car With Bad Credit

Car sales have remained strong in recent years. In 2021 alone, Americans bought around 40.9 million used cars.

That did create a bit of knock-on effect of driving up prices, even for older used cars. While great for used car dealers, that wasn’t such good news for people looking to buy a car with bad credit.

When used car prices were lower, they often represented a viable path to car ownership for those with less-than-stellar credit. You wouldn’t get the best cars, but you could probably get a car loan for the lower asking price. You can also buy a Fake Driver License for your car.

So, how do you buy a car with bad credit these days? Keep reading for tips that can help you snag a vehicle, even without an excellent credit score.

Pay Cash

While it’s not a great option for everyone, paying cash is the most straightforward way of getting a car when you have bad credit. It eliminates the need for loan approval, which takes your credit score completely out of the equation.

You also take a pass on the interest and fees that go along with an auto loan. The catch is that you’re strictly limited to your cash in hand. Whatever amount you have available is the absolute cap that you can pay for a vehicle.

That hard limit can create a much smaller pool of potential cars that you can buy. You may find yourself stuck with a car that has a lot more mileage or more problems than you might accept if you had a bigger budget available.

Boost Your Credit Score

You can’t magically boost your credit score from poor to good or fair to excellent overnight. That doesn’t make boosting your credit score a pointless task.

Let’s say that your credit score is on the borderline between poor and fair. With a bit of effort, you can probably nudge that score over the border from poor to fair. It may not seem like a big deal, but it can make a meaningful difference in the interest rates you’ll get offered.

Reducing credit card balances is one way you can nudge your credit score up. The more of your available credit you use, the more it lowers your credit score. If you can bring that usage down, it can often mean a small boost in your score.

Get your bills up to date and make on-time payments. This takes a bit longer but will make a difference. Payment history makes up about a third of your credit score.

Save Up for a Down Payment

There are a couple of good reasons that you want some money tucked away for a down payment. Right up at the top is that a down payment reduces the total amount you must finance for the loan.

A smaller loan amount improves your odds of approval. Just as importantly, it can also snag you a slightly lower interest rate. Given that those with poor credit scores often face higher interest rates on their loans, even small reductions can save you a fair bit of money over the life of the loan.

The other reason is that it reduces the risk for the lenders. A down payment boosts your personal investment in the vehicle. That makes you less likely to default on the loan and trigger a repossession.

Lenders hate repossessing cars because it’s expensive. Plus, they have to start the selling process all over again with a car that has more mileage on it.

Consider Cheaper Cars

A lot of people go into the car shopping process with a specific vehicle type or even specific models in mind. Those self-imposed limits can mean you only look at vehicles that cost more. Unless your job demands a certain kind of vehicle, like a pickup truck, try keeping a more open mind.

Instead of searching for specific vehicles, search for vehicles in specific price ranges. For example, you could limit your search to vehicles in the $5,000-$10,000 range.

Yes, you will see more older cars with higher mileage. So, consider how you use your vehicle. Are you making a long daily commute or mostly working remotely?

If you’re making long daily commutes, a car with high mileage can prove problematic. If you’re mostly working remotely, how much driving do you actually do in a month? A higher-mileage vehicle could still last for years.

Do Some Loan Shopping

Dealer financing is the most common approach people take with vehicle financing, but it’s not the only option. Your own bank might offer you an auto loan at a better interest rate.

Apply with multiple lenders online and see which one of them comes back with the best offer. Some people worry about their credit scores when applying with multiple lenders, but it typically won’t hurt your score beyond the average hit you take if all the inquiries come in within a week or two.

You can also look for lenders that specialize in bad credit loans. If you’re not sure where to find those, you can see more information here.

Check the Terms

Before you accept any loan offer, make sure you check the terms carefully. In some cases, you’ll find out that lenders offset a lower interest rate with a lot of fees.

You should do the math on all of the offers, including what you’ll pay in fees. That higher interest rate offer may actually cost you less in the long run.

How to Buy a Car with Bad Credit? Plan

When you want to buy a car with bad credit, you must do a bit of planning and research. For example, you must plan out how much you can save up for a down payment.

You must also do some research in terms of vehicles and available financing. Looking for pre-approval can help you determine how big of a loan you can realistically expect to qualify for with bad credit. Don’t fixate on a specific vehicle type. 

Looking for more tips on vehicle buying and financing? Check out the posts in our Business section.

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