Bad Credit and the Benefits of Buying a Used Car

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - January 27, 2021

If you're already struggling with poor credit, it can be beneficial to purchase a used car. This isn't just because used cars tend to be less expensive than new ones, but it's certainly one of the top reasons to consider financing a used vehicle as a bad credit borrower.

Used Cars Benefits for Bad Credit

Used vehicles have a lot of benefits when you're working with a limited credit score. The lower your credit score is, the more difficult it can be to qualify for high-priced auto loans. This can price you out of a new car in some cases.

However, just because that brand-new model you've been dreaming about isn't quite within reach, it doesn't mean that you have to set your sights on a clunker either.

Used vehicles typically start at a lower price than the new models of the same make. They've generally already seen their steepest depreciation, which happens within the first few years of ownership. And, due to the advanced safety features and technology in most cars these days, buying used also means you may not have to skip out on the features you want most.

All of these points are benefits of buying a used vehicle, especially if you have a lower credit score. As a credit-challenged consumer, it can be more difficult to qualify for an auto loan. When you do qualify, you're likely to be assigned a higher than average interest rate, which leads to a higher overall car loan cost in interest charges.

This means that a smaller car loan is an advantage when you're a bad credit borrower. Plus, if you borrow less money to start with on your auto loan, you may be able to put the savings into an extended warranty and GAP insurance coverage, which typically gives you enough coverage to make up for any shortcomings of your new-to-you vehicle.

Extended warranties can offer you savings on costly repairs if needed, and GAP coverage can pay out negative equity on your loan in case something happens while you're financing. Protecting yourself from the possible downfalls of financing a used vehicle is a good way to protect yourself and your credit.

Are There Advantages to Buying New?

New cars have advantages, but the biggest benefit is the potential savings down the road. Since many come standard with the latest safety and tech features, they have the potential to outlast a used car.

Additionally, new vehicles come standard with a manufacturer’s warranty that typically covers the cost of maintenance and repairs for a certain length of time or number of miles, whichever comes first. This peace of mind often comes with a hefty price tag, making a new car loan hard to come by if you're a bad credit borrower.

It's not impossible, though. The key is finding an affordable, reliable new vehicle. Sometimes this is difficult to do because auto loans for people with bruised credit tend to start with approval, and then you're shown a selection of cars that fit into the maximum payment range given to you by a lender.

How Bad Credit Financing Is Done

When you apply for financing with a subprime lender, choosing a vehicle comes after the approval.

You apply for financing with the help of the special finance manager at a special finance dealership. They may send your information to one or more subprime lenders, depending on how many they’re signed up. From there, if you’re approved for a car loan by at least one, the lender sends the special finance manager your maximum monthly payment based on your eligibility.

This means that your vehicle selection is heavily determined by your down payment size, your monthly income, how much income you have available for car-related expenses, your credit reports, and more. You may very well qualify for a brand new vehicle if the car payment fits within the subprime lender’s stipulations.

Car Buying Starts With Finding a Lender

Whether you plan to buy new or used, it's important to work with the right type of auto lender for your situation. With bad credit, chances are you need to work with a subprime lender through a special finance dealership. Not all lenders work with borrowers who have credit scores below a certain point – around 660 or below.

When you need to find an auto loan but are worried about your lack of credit getting in the way, don't fret. You're in the right place to get a jump start on all your car buying and auto lending needs.

While we aren't a lender here at CarsDirect, we've cultivated a nationwide network of special finance dealers that spans the country, and we've been connecting borrowers like you to local dealerships that can help for over 20 years. Just fill out our fast, free, no-obligation auto loan request form, or start shopping cars today through our new and used inventory pages.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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