Bad Credit Car Shopping Through the Eyes of an Insider


A car is a vital necessity for most people to get basic things done in life: commute to work, shop for groceries, and travel. This is especially true for people who live in smaller cities and towns with underdeveloped public transit system. Buying a car is a large investment, with most people having trouble coming up with out-of-pocket cash to cover the price of the car. For many people, taking out an auto loan is the only way to purchase a vehicle. Shopping for a car loan is similar to any other kind of shopping, and bargain-hunting may save you tons of money. This especially applies to people with bad credit, whose options are more limited compared to good credit borrowers. While many people think getting auto loan with bad credit is impossible, it is quite feasible if you know how finance companies and auto dealers work.

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Dealerships Do Make Money on Loans, Too

Many people know that auto dealers mark up the cost of the cars to make a profit. Very few, however, realize that dealers also mark up the interest rates on loans for vehicles purchased through them. You come to the dealer, pick the car you like, and complete the car loan application. Many dealers, knowing that your credit is not great, may increase your interest rate by a couple points, even if you have been approved for a lesser APR. If a lender approved you for 10% interest, a dealer may confront you with an interest rate of 12%, thus making an additional profit of 2 points on your interest throughout the life of a loan. Many people would settle for it, since they believe their options are very limited.

A Credit Report Review Is the First Step in Getting an Auto Loan

Reviewing your credit history is the first step in shopping for any loan, not just auto loan. Many people do not realize that a few small errors on their credit may serve as a basis for loan rejection or higher interest and fees. That is why it is important to go through your credit report and verify all the information listed. If some of it appears to be incorrect or missing, contact the credit bureau to make necessary changes and adjustments immediately. Also, always focus on improving your credit scores by making timely payments on all your loans and credit cards, as credit scores play a leading role in loan-granting decisions.

Plan Your Expenses Far Ahead

Do not overextend yourself by buying a more expensive vehicle than you may afford. Many people rely on monthly payment amount rather than on a vehicle purchasing price when judging their ability to afford it. This is a common mistake that prevents people from seeing a whole picture. Lower monthly payment may cause you to pay more in interest and fees, and that is what you should avoid. A smart move would be to choose a car that has good reliability, low repair costs, strong residual value, and lowest price possible. An online research may help you to address all above. Reading customer opinions, reviewing blue book values, and getting online price quotes from dealers is a key to a great bargain.

Never Take the First Offer

Once the car is chosen, it is time to shop around for loan. You are in no way obligated to take financing offered by a dealer. Before agreeing to the terms proposed by a finance manager at an auto dealer check around. Contact independent financing companies and get loan quotes from them. Internet allows you to do it quickly and efficiently. This way, you may ensure yourself best deal possible on your auto loan terms, without having to overpay in interest at a dealership.


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