How easy something is can be subjective, depending on what your definition of ease is! We're covering three easy ways to buy a car, and what your options may be based on your credit rating.
1. Buy a Car With Cash
If you have enough cash to pay for a vehicle outright, it could be the simplest way to get into a car. There’s no need to find a lender, worry about paying interest charges, or gathering documents to apply for vehicle financing. With enough cash in hand, you can also go to a dealership or find a private seller – it’s your choice.
Paying cash for a car allows you to buy one without having to worry about your credit rating, too. If you pay full price, you aren't likely to have much paperwork to do – just completing a purchase order, filling out a bill of sale, and signing the title typically. When you buy a vehicle, even if you're doing it with cash, an ownership transfer involves going to a Department of Motor Vehicles or Secretary of State to register the car in your name.
Not having to finance also means you aren’t required to follow a lender’s insurance requirements. Financing a vehicle means carrying full coverage because it’s required by the lender. But since you're paying cash, you only have to choose an insurance plan that meets your state’s minimum requirements.
Of course, paying cash for a car isn’t an option for many people. Vehicles can be pricey – especially new ones! Luckily, financing can be easy for many consumers.
2. Get a Preapproval
An auto loan pre-approval gives you the freedom to shop wherever you’d like in most cases, and it can make car shopping easy. You apply for financing with a direct lender such as a bank, credit union, or online lender to get a preapproval. If you qualify, the lender determines your maximum financed amount and this determines your spending limit. There’s no guessing how much car you can afford since your preapproval has done that for you.
You can take your preapproval to a dealership or even shop with private parties, like a cash buyer. While preapprovals can give you freedom, remember that auto loans still come with interest charges. Interest is the price you pay for borrowing money. The better your credit score, the better the interest rate you are likely to qualify for.
Many borrowers apply for a direct loan through the credit union they're a member of. Credit unions tend to offer competitive interest rates since they’re member owned, and may be more lenient if you have poor credit. If you’ve been a member of your credit union for a while, and your accounts are in good standing, they may be more willing to extend a loan to you.
The hardest part of getting a preapproval is qualifying for it. Lenders that offer direct auto loans tend to prefer borrowers with good credit. If your credit score is less than perfect, then you may have to consider financing with a special finance dealership.
3. Finance Through a Dealership
One of the easiest ways to buy a vehicle is financing through a dealership. Dealers are usually signed up with third-party or indirect lenders. This could include the captive lenders of automakers and/or bad credit lenders. This means you could head to a dealership, find a vehicle you like, then apply for financing with their finance and insurance department (F&I).
Dealers that are signed up with bad credit lenders (subprime lenders) are called special finance dealerships. If you have poor credit, you can apply for vehicle financing first, determine your maximum monthly payment, then find a car that fits your needs and the lender’s stipulations.
Applying for financing with a dealer often means a one-stop-shop experience. Instead of driving to a bank or credit union, applying for financing, and then looking for a dealership, you can skip the drive to multiple locations. And, since many dealers are signed up with multiple lenders, you can usually try for auto financing with one or more lenders in one place.
Of course, just like direct lenders, third-party lenders that are signed up with dealerships assign interest. If you have poor credit, you can also expect a down payment requirement from subprime lenders.
CarsDirect Tip: If you’re worried about paying excessive interest charges, then consider a large down payment. This lowers your total financed amount and lowers your interest charges over the course of the loan. Making extra payments or paying extra each monthly payment decreases how much interest accrues too.
Not Sure Which Car Buying Option Is for You?
Choosing the right path to purchase your next vehicle can be largely dependent on your credit rating, and how much cash you have saved up. Many traditional auto lenders require a good credit score to be eligible for vehicle financing. However, special finance dealerships are equipped to assist borrowers with unique credit situations. If paying cash for a car isn’t an option for you, or you want to take on a car loan to improve your credit, then consider a subprime car loan.
Here at CarsDirect, we’ve cultivated a network of dealerships that are ready to help bad credit borrowers. Get matched to a dealer in your local area by completing our free auto loan request form.