What Kind of Car Can I Get With Bad Credit?

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Automotive Content Editor

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.

, Automotive Content Editor - January 20, 2021

Having bad credit can make it seem like the odds are stacked against you when it comes to getting big-ticket items, such as a car. It's possible to qualify for different kinds of vehicles and auto financing options, even if you have poor credit. You might have to work with the right lender, though.

Vehicle Options for Bad Credit Borrowers

It may surprise you to know that a new car isn't necessarily out of reach if you have less than perfect credit. In some cases, an affordable new vehicle may be a better alternative than a cheap used car. New cars come with a manufacturer warranty and can save you money in repairs down the road. A used car typically comes as-is, and being an older car, may be more prone to costly breakdowns. A cheap, used car may be less right now, but it could end up costing you more down the road!

There's an option between new and used vehicles too: a certified pre-owned (CPO) car. These are usually newer used cars, many just coming off lease. They're refurbished and come with some form of a manufacturer-backed warranty. CPO vehicles are more expensive than a typical used car, but they often come with more features and better fuel efficiency than older used ones. The peace of mind from a warranty can be worth the extra cost alone, especially since CPOs usually save you a lot of money over a brand new vehicle.

If you work with the right lender for your credit situation, you may have the ability to finance a new vehicle, a CPO, or a reliable used car.

Vehicle Stipulations With Subprime Lenders

With poor credit, you’re likely to have a better shot at getting approved for an auto loan with a subprime lender. They’re indirect lenders that are signed up with special finance dealerships. Like every other lender, they have requirements you must meet, and they restrict the types of vehicles they finance.

If you decide to work with a subprime lender, know that they don’t just approve a car loan for every car on the dealer’s lot. While the vehicle stipulations vary, when it comes to your options most subprime lenders require:

  • The vehicle is less than 10 years old
  • The car has less than 100,000 miles
  • Your loan amount is at least $5,000
  • You have a down payment of at least $1,000 or 10% of the vehicle’s selling price
  • The vehicle’s title is clean

Subprime lenders don’t want to approve financing for a vehicle that’s on its way out. Auto lenders prefer financing vehicles that are in good condition, with relatively low mileage, and those with clean titles. The good news is that brand new vehicles definitely meet a subprime lender's vehicle specifications – just not the clunkers on the dealer’s lot. If you have the means to afford a brand new car, just poor credit, it’s certainly possible to finance a new or newer car with a subprime lender.

Choosing the Car That's Right for You

If you're not sure where to start looking, or even what kind of vehicle is best for your situation, we have a few tips for finding the car – and the auto loan situation – that's right for you.

  • First, make sure you know what your credit situation is. If you know your credit score and what's on your credit reports, it's easier to prepare a budget for your auto loan. This also allows you to research things like average interest rates for people with similar credit scores, and what loan amounts borrowers in your credit range are qualifying for.
  • Prepare a budget. The vehicle you can afford is often dictated by how much of an auto loan you get approved for. You can get an estimated loan amount using our Car Loan Estimator, and begin researching options that may fit your needs. This is only an estimate, though, and the amount of car loan you qualify for depends on your lender and your personal situation.
  • Make a list of must-haves for your next car. You should always go into any auto loan situation knowing what you need from a vehicle. If you drive a lot, there's no sense in getting a vehicle with poor fuel efficiency. If you have a family of five, you may need more room than a compact sedan. This is another example of why vehicle research is important before you even set foot in a dealership.
  • Don't skip the test drive. Whether you're approved for an auto loan on a new or used car, it's important to always test drive the vehicle. Though checking every nook, cranny, and detail is most important in a used car, new vehicles don't always come without flaws, so it pays to take it for a spin. If you're financing a used car, don't forget to take the car to an independent certified mechanic for a look under the hood. They may be able to spot issues that an untrained person could overlook.
  • Weigh the cost of financing and ownership. Don't forget that the cost of financing is only the first expense in vehicle ownership. It's more than the car's selling price, too. Typically it starts with a down payment – usually at least $1,000 or 10% of the vehicle's selling price – and also includes things like tax, title, and license fees. When you're financing you're required to carry full coverage auto insurance, which can be expensive depending on the vehicle and your situation. You also have to consider the cost of maintenance, repairs, and fuel.

Lender Options for Bad Credit Auto Loans

If you're in a tough credit situation you have a better chance of getting an auto loan approval if you work with a subprime or in-house lender. Both types of lenders cater to similar borrowers, though there are some major differences between the auto loan process.

Subprime lenders:

These are usually third-party lenders that typically work with consumers who have a credit score of around 660 or lower. All lenders have specific requirements for the borrowers they lend to, but in general, subprime lenders look at additional factors besides your credit score.

These include proof of income, employment and residence stability, and the willingness to make a down payment. You're typically also required to bring in five to eight personal references, proof of a working telephone, and a valid driver's license.

Though most subprime lenders are independent lenders, some captive lenders (the financing arm or an automaker) work with bad credit borrowers.

In-house financing:

These dealers are typically found at buy here pay here (BHPH) lots, and they're both the dealer and the lender. Your credit score may not matter to these dealers, since they don't rely on third-party lenders for loan approval.

In fact, many BHPH lots don't make a practice of checking your credit. To compensate for this, though, they often require a high down payment amount to get the loan started. You're also likely to see the steepest interest rate when you go through an in-house lender.

Finding Your Next Car Loan

New cars and CPOs can be found through a franchised dealership, while independent dealerships and BHPH lots only sell used vehicles. Many people think that franchised dealerships aren't a good option for bad credit buyers, but that isn't always the case.

Many franchised dealerships work with both captive and independent lenders, some of which work with people in unique credit situations. No matter what type of dealership you end up going to, not all of them work with subprime lenders, so it can be tough to know where to start your path toward auto financing as a credit-challenged consumer.

At CarsDirect, we take the guesswork out of finding a dealership that has the lending options you're looking for. Our process is fast, free, and easy to get started – simply fill out our auto loan request form – we'll get to work matching you to a dealer in your area!


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, Automotive Content Editor

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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