Buying A Used Car With a Bad Credit Auto Loan

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Senior Automotive Editor

Christian Gulliksen is the Senior Automotive Editor for CarsDirect. He was formerly a senior editor with Robb Report magazine, and has contributed to publications like Worth, Variety, The Hollywood Reporter and MarketingProfs.com.

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, Senior Automotive Editor - April 27, 2016

CarsDirect Fact: For many buyers with bad credit, a used car may be their only option. That isn't a bad thing, though—a used car may be a financially responsible path to a car you really want.

If you need to finance a car and your credit isn't so great, a used car may be your only option—the lower your score, the lower your chances of being approved for a new car loan. But even if you can get financing for a new car, a used car may still be the better choice when you're rebuilding their credit.

  • You have broader—and better—options. Manufacturers don't often loosen their credit standards for popular brands or models; financing a new car with bad credit usually means buying something that doesn't sell well. Opting for a used car opens the possibilities to models that earn high ratings for reliability and desirability.
  • You won't spend more than you have to. When you buy a used car, especially one that's only a few years old, you let someone else pay for its depreciation. Modern cars are built to last, and one with only 20,000 or 30,000 miles has just been broken in. As nice as it is to have a new car, it's nicer to have a lower payment that helps you get back on a stronger financial footing.

Get pre-approval from a dealer who specializes in loans for customers with bad credit

  • You can still get a factory warranty. If you buy a car that's new enough, it may still have time left on its factory. Certified pre-owned (CPO) cars, meanwhile, cost a little more but usually come with excellent warranty protection. When you buy a car that's almost new, the usual concerns about a used car purchase are greatly reduced.
  • You will probably pay lower insurance rates. A brand new car is likely to have higher insurance premiums than its used equivalent. Unless you live in an area with exceptionally low rates, this could be a significant monthly savings.

Buying a used car instead of new has drawbacks, of course. You'll be paying for major maintenance and repairs sooner rather than later. And interest rates are higher for a used car auto loan than they'd be for a new car. But if your credit scores means you need to buy a used car, there's no reason to think of a used car as a penalty—it can be a great option.

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, Senior Automotive Editor

Christian Gulliksen is the Senior Automotive Editor for CarsDirect. He was formerly a senior editor with Robb Report magazine, and has contributed to publications like Worth, Variety, The Hollywood Reporter and MarketingProfs.com.

Follow On: Google+ | Website

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