Is Now the Time for Subprime Auto Financing?

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - September 14, 2020

Subprime financing is for borrowers with credit challenges, but not everyone needs it. We explore common bad credit situations where subprime financing is a good next step to an auto loan.

Subprime Car Loans and Your Credit

Borrowers with credit issues can check out a subprime car loan for their next vehicle. Many traditional auto lenders are likely to turn away borrowers with damage on their credit reports, or those who’ve had some struggles with managing credit in the past.

If any of the following situations feel familiar, subprime financing could be for you:

  • A past repossession is listed on your credit reports. Borrowers who’ve had a repossession that’s even a few years old can mean getting turned down by traditional lenders. Subprime lenders are more lenient when it comes to a past repo. Once a repossession is at least one year old, subprime financing could be the next step in getting into a car.
  • You’ve recently been discharged from bankruptcy. Due to the damage a bankruptcy can have on your credit score, you’re likely to have a lower credit score despite completing your bankruptcy and reorganizing your finances. Subprime lenders often assist post-bankruptcy borrowers and help them get into their next vehicle.
  • Your credit score is below around 660. If your credit score is lower than around 660, you’re usually considered a bad credit borrower. Traditional lenders typically have higher credit score requirements, so even if you have enough income to afford a car loan, a poor credit score could be the sole reason for a denial. Subprime lenders look at more than your credit score to determine your ability to take on an auto loan.
  • You’re a first-time borrower. If you’ve never had a car loan, or any other type of credit, you’re likely considered a no credit borrower. It isn’t necessarily a bad thing, since everyone has to start somewhere, but having no credit typically leads to a lower credit score. Many no credit borrowers are required to have a cosigner to qualify for traditional auto financing. If you can’t find a cosigner, a subprime car loan could be what you’re looking for.

Any of the above scenarios can make direct lenders from credit unions or banks hesitant to approve you for an auto loan. If you’re struggling to get approved for a car loan, seeking out a special finance dealership is your next step in getting in touch with a subprime lender.

More on Subprime Auto Financing

Subprime lenders are a little harder to find than a direct lender. They’re third-party lenders that are signed up with special finance dealers.

Special finance dealerships have a special finance manager who acts on the subprime lender’s behalf. You never meet with the subprime lender in person, but instead, the special finance manager acts as your middleman.

After you find a special finance dealer and submit your information with them, it gets sent to one or more subprime lenders. A subprime lender checks out and verifies your info, and determines if you qualify for an auto loan.

If you’re eligible, the subprime lender tells the special finance manager how much you're approved for. You then pick a vehicle that fits your unique situation. Once all the paperwork is completed, you can take delivery of your car and get to repairing your credit.

Perhaps one of the best reasons to seek out subprime financing is the chance for credit repair. Other bad credit dealerships, like buy here pay here dealers, may not report their auto loans to the credit bureaus. A car loan that isn’t reported doesn’t improve your credit score for future credit opportunities. Subprime lenders do report their auto loans, and with timely payments, so you can build your credit back up (or for the first time!).

Where Are Special Finance Car Dealerships?

Finding a special finance dealership doesn’t have to be difficult if you start with us at CarsDirect. We’ve created a nationwide network of dealers that are signed up with subprime lenders, and we can match you to one at no cost.

Get started right now by filling out our car loan request form – it’s quick, secure, and we’ll get right to work looking for the dealership that has the lending resources you need.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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