Last Updated On: September 20, 2016

How to Buy a Used Car With Bad Credit

Advantages of Buying a Used Car With Bad CreditNo matter how well you take care of your vehicle, there will come a time when you will need to brush off the old credit report and get another car.

It is easy to forget just how important your car is, until the day you need to replace it. Then you need to pick out your next new or used vehicle.

Buying a used car with bad credit can be a struggle for some. Many won’t go looking for a car and will continue driving a car with many mechanical problems because they know their credit score is low and they can’t get financing for a really dependable car. Car accidents settlements after a total loss can leave you looking for an auto loan you were no prepared for.

Many can’t decide whether to buy a new or used car or a new car is not an option. Others do not want to buy a used car that is full of problems and do not know how to find a good dependable used car.

Used Cars Offer Huge Benefits

Let us explain the benefits of buying a used car and show you how to make a wise choice. It is wise to find a good deal on a used vehicle because brand new cars lose their value quickly and leave you with a loan that is worth more than the vehicle. A new car loses 20% to 25% of its value practically the minute you drive it off the lot. It is easier to justify paying for a used car because the value of the vehicle usually keeps pace with the loan and the car is still worth the same price the day after you drive it home.

Not only do you save more money, as the average cost of a used car is only $15,000 or less, but you will not face the massive car depreciation when you drive off the lot. You can also use pre-owned certification programs, which are available at many used car dealerships.

Certification Programs

Certification programs to buy new or used cars are only offered through new and used car dealerships. Certification programs are programs that make sure that the used car that you are purchasing meets certain quality standards and has no defects or mechanical problems. Usually, to qualify for a certification program, the used car is less than 5 or 6 years old and limited to 50,000 and 100,000 used miles. Once the car meets such standards, the car is then put through some intense inspections to verify whether it is a quality car. This assures that the vehicle is a more reliable and more valuable vehicle and you can invest in a reliable used car with confidence.

Most of these cars carry the new car warranty because most warranties do not expire until the third year, and many cars now have a five year warranty. When you consider a used vehicle that is only a few years old, you can take advantage of the remainder of the original factory warranty.

More Advantages of Used Car Certification  Programs

When you buy a good used car, the list of checks performed is usually available to you, which offers a great deal of information and honesty on the part of the dealership. In addition to this, you can also receive a used-car history report that is typically issued by Carfax. You will know to whom the car has been registered in the past, accidents, when it was bought and sold, and the reported dealer service.

This entire certification program is extremely useful, as it not only provides you with relevant and valuable information, but it also makes buying a used car a simple and straightforward process.

More Bang for Your Buck

Many people fail to realize that buying a used car can give them more for their dollar. Rather than spending the same amount of money on a smaller model that you dislike, you can buy a used model that you are in love with for exactly the same price. This also holds true for car brands. You can choose to buy a used luxury car that you have always wanted, rather than spend the same amount of money on a new car from a less prestigious brand. Besides, with the quality of many used car these days, not even you will be able to believe that the car that you have just purchased is used.

Should I Buy A New or Used Car? Here Are Some Tips

To make your shopping experience better, start with the basics.

There are some guidelines that you should follow to buy a new or used car.

  • Know what you are looking for and pick out the vehicle YOU want!
  • You should consider keeping your first purchase simple and set a price range for yourself.
  • Compare similar models and make sure that a quality check or maintenance inspection was performed.
  • If you have bad credit, talk to a credit expert. You can apply for a subprime car loan, gut a pre approved car loan and put down a sizable down payment. If you have to use dealer financing, do so as a last resort.

Check Out Your Credit Report First

What about financing a used vehicle? It has been a while since you took out a significant loan of any size, and you are just not sure about your credit. If you have bad credit, then you will need a lender that will work with your low credit score to get you the financing you need. Then you can choose the car you want at a price you can afford.

Sometimes you can improve your credit simply by looking your credit report over and having the credit reporting agencies remove incorrect information. The three major credit reporting agencies are:

  • Trans Union
  • Experian
  • Equifax

According to federal law, each of these agencies must provide each American consumer with one complete copy of their credit reports every 12 months. Order your reports and then use the dispute process outlined in the report to get your personal information corrected or, more importantly, get any inaccurate information removed from your profile that do not belong to you. Any improvements you can make here can go a long way when buying a used car with bad credit. You can also find out more information about your Auto Industry Credit Score. This score is not easily accessed and you may have to pay for a copy of the report it but it will be the score that most car dealers look at.

Talk To Bad Credit Experts

Instead of getting your financing done at the dealership and taking a financial beating because of your bad credit score, you should get pre-approved by a company that deals with bad credit auto loan consumers. They provide buyers with better rates because they are set up to help people improve their credit without taking advantage of the selling price of the car. Valley Auto Loans can help you get the kind of financing you need to buy a new or used car. In some cases, you can even get vehicle financing without putting any money down, which can save you a great deal of cash on the spot.

Improve Your Credit Score With A Bad Credit Auto Loan

Do you need to buy a new vehicle this minute, or can it wait 30 days? You can improve your credit score by doing simple things such as paying your bills on time and paying the full minimum payment each month. You can also improve your credit by paying balances down and by using your credit accounts responsibly. After 30 days of good credit habits, you should be able to raise your credit score and get a better deal on your loan and ultimately make it easier to get an auto loan.

Before Heading Out to Shop For Your Next Car, Consider Some Used Car Buying Basics

Get A Large Down Payment.

If you are looking to buy a new or used car with bad credit, then you can ease your lender’s fears by putting up a sizable down payment on the transaction. Cash down payments will show the bank that you are committed to the deal and that you have the resources necessary to make your payments. Down payments on used vehicles do not need to be substantial to impress the lender. In most cases, a down payment between 10 to 20 percent should be what you need to get a solid loan at an interest rate that you can live with. This down payment will also put you in a position to get lower payments on the loan.

Have A Co-Signer.

It is always uncomfortable to ask a friend or family member to be a co-signer on your car loan, but it may be your only way of getting the loan you need. It is best to have a co-signer that is comfortable with your ability to pay the loan and who will not have second thoughts when it comes time to sign the paperwork. It also helps to have a cosigner who has excellent credit. You may be able to get your loan with a co-signer who has decent to good credit, but you significantly increase your chances with a co-signer with excellent credit. It is also a good idea to know the difference between a co-signer and a co-buyer.

Don’t Forget Your Trade-In When Applying for a Bad Credit Auto Loan.

You,d also like to get into something for as little money up front as possible. Before you go to the dealership to get your next used car, you may want to find out exactly how much your trade-in is worth. You could have a trade-in that will be worth more than you could have ever imagined and that could help you get the loan you need. Go online 1 and do your best to decide the real value of your trade-in. If the dealership is not going to give you a fair deal on your old car, then sell your old car yourself and use the money as the down payment on your next used car. Always remember to negotiate your trade-in value separate from the car you are trying to buy. Dealers love to undercut your trade in price by offering you a lot for your trade but adding extra fees to the loan to compensate, or they will give you less for your trade to get the selling price of the car higher.

Always Shop The Best Deals, for a Used Car with Bad Credit.

Never underestimate the power of a good deal on a quality used car. Stick with cars that are within your budget. Spend some time shopping around and see if you cannot get a great deal on an excellent car. Dealers do not want you to leave without closing the deal because they know the next dealer you see, will do his best to give you a better deal. Shopping around will get you the best price for that car. You may want to try private people who are selling their vehicles to see if you can negotiate a great selling price with them.

Once you have the right price, if you have not gotten a pre-approved amount, then take it to a lender to see what kind of deal you can get on financing. Shop around for financing like you would for a car and again, you will get the best deal. Most auto loans will help you rebuild you credit score in a short time if you handle it responsibly. Sometimes a bank will work with your bad credit if you have a valuable deal in the works, and you have a steady income.

Remember To Focus On Negotiating The Terms Of The Loan.

When you have bad credit, you could come across a dealer who will try to take advantage of your situation. You may talk to dealers who will tell you that an incredibly high-interest rate is your only option, and they may try to distract you by focusing on the monthly payments. If you negotiate a good overall loan deal, then the monthly payments will take care of themselves. Do not let your negotiations get distracted by talking about monthly payments instead of the entire value of the loan. In fact, never mention to the dealer what monthly payments you are looking for until after you settle on a price for the car and your trade in.

 Don’t Get Talked Into Features You Do Not Need.

Car buyers with bad credit will sometimes get told that they have to add features such as extended warranties to the final deal if they want to get approved. The dealer will say that the extended warranty is mandatory for bad credit borrowers because it helps protect the value of the vehicle in case you default on the loan. The truth is that you should be able to get a car loan without having to pay for anything other than the used car. Your credit score should not force you to spend more money than you can realistically afford. Learn to recognize dealer scams and don’t agree to extra charges.

Trying to buy a new or used car and get into something for as little money up front as possible, when you have bad credit can seem like an uphill battle. However, it is not so bad when you know how to go about it. A sub-prime auto loan gives people the chance to invest in a reliable vehicle. Take the time to understand your credit profile and then do what you can to improve your credit score before you look for used car financing. When you are negotiating the deal, do not let a dealership or lender take advantage of your bad credit situation. Learn to protect yourself when you have bad credit, and you can get the used car, and bad credit auto loan, that is right for you.

Sources and Citations:

  1. http://www.kbb.com/