Can People with Bad Credit get a Loan for a CPO Car?

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Even with poor credit.

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Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


, Contributing Writer - March 24, 2017

Auto shoppers with bad credit are generally working in a limited budget, but are stuck financing their purchase at a higher interest rate. Those constraints make a used car a smarter purchase. Certified pre-owned cars – that is, vehicles that have been thoroughly vetted by a dealership-trained mechanic following a manufacturer-approved maintenance regime – give consumers with bad credit access to some of the best attributes of the new and used market, but only if they're realistic with their purchase.

Why Would Someone with Bad Credit Want to Buy a CPO Car?

Even with bad credit, a certified pre-owned vehicle can carry a lot of appeal. While CPOs generally cost a few thousand dollars more than a typical used vehicle, manufacturers typically only extend their CPO programs to newer vehicles, which in most cases are still in production. In other words, it's usually hard to pick out a CPO vehicle from a brand-new vehicle on the road.

Beyond the new-car looks, certified pre-owned vehicles generally come with a manufacturer-backed warranty, and as we said, have been subject to a thorough inspection by the dealership before hitting the used car market. And because these vehicles are older, they've already taken the depreciation hit of a newer vehicle.

With that in mind, it's no surprise that automakers have been expanding their CPO programs and consumers have responded positively.

Buying a Car with Bad Credit and the Issue of Affordability

Picking up a CPO vehicle with bad credit usually means dealing with a special finance lender that can look at more than just your credit rating. While lenders will want to know that borrowers meet minimum income requirements for a loan –generally $1,500 to $1,800 in pre-tax income every month – they'll also look at a consumer's debt-to-income (DTI) ratio.

Ideally, special finance lenders like to see no more than 40 to 50 percent of a borrower's income going towards bills and expenses, which includes vehicle payments and insurance costs. This is why it's important for consumers with credit issues to stay within their budget when selecting a vehicle to purchase. Here's an example:

A consumer with a gross regular income of $3,000 per month and a credit score of 600 needs to finance a vehicle. They definitely meet the minimum income requirement, but their pre-car loan expenses come out to $1,000 a month. With a target DTI ratio of under 50 percent, their existing bills and expenses plus a car and insurance payment should only equal $1,500. This means that, at the most, they will be approved for a monthly vehicle payment of $500 including insurance costs.

That's not a lot of money for a new vehicle, but it could be plenty for a quality – i.e. with low miles and relatively new – used vehicle. Or, if our hypothetical consumer is clever with their down payment and the length of their loan term, a CPO wouldn't be out of the question. But scoring the benefits of a certified pre-owned vehicle on $500 per month will mean avoiding larger, more expensive vehicles, especially those from luxury brands. However, a CPO compact, subcompact, or even mid-sizer from a mainstream brand could be within our example's reach.

Easy Financing Assistance for Car Buyers with Bad Credit

If you're working to improve a low credit score, the right car fits your budget and driving needs. And at CarsDirect, we can help navigate the bad credit car buying experience with ease. We can quickly match you with a dealership in your area that can help find the right vehicle and the financing you need.

Our service is absolutely free and comes with no obligations. So, go ahead and fill out our simple and secure 1-Step Auto Loan Request to get started today.

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, Contributing Writer

Amy Fortune is a contributing writer for CarsDirect and lead writer/editor for AutoCreditExpress. She also contributes regularly to several other high-traffic blogs. Amy was born in North Carolina and grew up with an appreciation for NASCAR and everything automotive. Now based in the Motor City, she continues to be happily immersed in car culture and automotive finance.


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