Buying a Car with Bad Credit: What to Keep in Mind

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Even with poor credit.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - October 9, 2019

When you have bad credit, you likely aren’t going to be able to walk into any dealership, pick out a vehicle, and drive off with a good deal. What you need to do is get approved for a loan with a subprime lender or buy here pay here (BHPH) dealer first, and then pick out a car. We can point you in the direction of a local dealership that can help, but we first want to explain the requirements for bad credit auto loans.

Bad Credit Auto Loan Qualifications

What do you need to qualify for a car loan? Ultimately, it depends on the type of lender you’re working with. Car buyers with bad credit usually apply for a loan with subprime lenders or BHPH dealers. Both offer bad credit auto loans, but have different requirements you need to meet.

Subprime lenders work through special finance dealerships. These lenders run credit checks, and report your on-time payments to the credit bureaus. However, they look beyond your credit score to other factors in order to approve you for a loan, such as your income and residence stability.

Buy here pay here dealers offer in-house loans for the vehicles on their lot. They don't rely on outside lenders, making them a one-stop shop for car buying and financing. As long as you have the income, you should be able to get approved.

The upside of BHPH dealerships is that they often don't even look at your credit, and instead base approvals on your income. The downside is that they may not report timely payments to the credit bureaus, so you can’t always improve your credit score over time with one of these auto loans.

With both types of lenders, you’re likely going to be approved with a higher than average interest rate. You can often offset these high interest rates by making a larger down payment, or adding a cosigner or co-borrower to the car loan.

3 Things to Consider when Buying a Car with Bad Credit

Now that you know the types of lenders you should be working with, how do you end up picking the vehicle that’s right for you once you’re on the dealer’s lot? Although you may not be able to pick the exact car you want with bad credit, it doesn’t hurt to do some new and used vehicle research ahead of time to get an idea for what you're looking for.

While you’re doing your research, keep these three questions in mind when narrowing down your car choice:

  1. Does the car fit your budget? – Using our Car Loan Calculator, you can get an estimate on how much vehicle you can afford. Keep in mind that there’s more to factor into your budget than the car's selling price. You also need to consider other costs of ownership like insurance, fuel, and maintenance and repair costs.
  2. Does the car meet your current needs? – Ask yourself what you need from a vehicle. Will you be the only one driving it every day? Do you need to haul kids around? Do you have a long commute to work? The answers to these questions could be the deciding factor between one car and another.
  3. How long do you want to keep the car? – If you plan on keeping this car for a long time, you should consider vehicles that hold their value over time and are reliable. Even if you plan on selling it down the road, picking a car that maintains its value could give you a chance to sell it for more.

    Need Help Finding a Dealership?

    Buying a vehicle is exciting, but it can be tedious and stressful if you’re dealing with bad credit. Not all dealerships are signed up with the right lending resources to help borrowers with credit issues, but at CarsDirect, we’re here to make it easier to find them.

    Our process is simple, free, and doesn’t put you under any obligation. To get connected to a dealer near you for the bad credit auto loan you need, fill out our car loan request form and we'll get to work for you!

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    Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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