How to Get a Car after Being Denied an Auto Loan

Get Car Financing
Even with poor credit.

By

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.


, - July 17, 2019

If you recently tried to get a car loan at a dealership and were turned away due to bad credit, the good news is that all hope isn’t lost. You can still get approved for an auto loan even after getting denied. You just need to work with the right lender, and CarsDirect can help with this. Plus, we’ve got some tips to help increase your approval odds.

Requirements for a Bad Credit Auto Loan

Getting a bad credit car loan isn’t the same as getting a traditional loan – there are specific requirements you need to meet. Subprime lenders work exclusively with bad credit borrowers through special finance dealers, and they ask that you provide additional documentation.

These documents, such as proof of income and residency, prove that you can afford a loan. You also generally have to make a down payment, usually at least 10% of the vehicle’s selling price or $1,000, whichever is less.

When preparing for an auto loan, you should do these three things:

  1. Check your credit – Know where your credit stands and what’s listed on your credit reports. This way, if anything listed is incorrect, you can dispute it to the credit bureaus.
  2. Calculate your debt to income ratio – You know how much you earn each month, so the next step is to calculate your debt to income (DTI) ratio. Your DTI determines how much available income you have, and you can calculate this by adding up all your monthly bills (plus the estimated car and insurance payment) and dividing the total by your pre-tax monthly income. Ideally, your DTI should be less than 50%, as this is the typical maximum subprime lenders accept.
  3. Calculate your maximum vehicle payment – Once you know your DTI, you can work toward saving enough money to afford an auto loan. A good tip is to calculate your payment to income (PTI) ratio, which looks at the max amount you can spend on a car. To calculate your PTI range, take your pre-tax monthly income and multiply it by 0.15 and then by 0.20 (below 15% to 20% is the range you should stay in).

Consider a Buy Here Pay Here Dealership

If you’re unsure about financing through a subprime lender, or have been denied by one already, you should consider a buy here pay here (BHPH) dealership. These dealers are also lenders, and offer in-house financing, making it easier to sign and drive. Their requirements are also different, and generally simpler – all you need is enough income and a down payment.

It doesn’t matter to a BHPH dealership if you have one, two, or even three jobs. As long as you meet the dealer’s income requirement, you shouldn’t have an issue financing a vehicle. Where things can get tricky is determining how large of a down payment you need.

Buy here pay here dealerships usually base down payments on the car choose. So, depending on the vehicle, you might need anywhere from a couple hundred dollars to well over 20% of the car’s selling price to meet the down payment requirement. It can be a gamble, and if you’re not prepared to make a large down payment, you could be in trouble.

Consider all down payment options: use trade-in equity if you have a vehicle you no longer want, save up some cash, or use a combination of both to maximize your down payment opportunity.

Start with CarsDirect Today

Now that you know what it takes to get an auto loan with bad credit, are you ready to get started? CarsDirect is here to help.

We're teamed up with a nationwide network of dealers that know how to handle unique credit situations, and we want to connect you to one in your area. All you have to do is complete our free, no-obligation car loan request form, and we’ll get right to work matching you with a local dealership.

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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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