Buying a Car with Bad Credit
There are pros and cons with every available option when you need a car and have bad credit. Your options are also limited depending upon of the extent of your credit problems, the length of employment at your job, your pay rate, and your down payment.
Financing a car with bad credit
New cars
If you have a large down payment and can afford a high payment and interest rate, you may be able to buy a new car. However, if your credit rating is poor enough that you cannot obtain credit anywhere else, you will likely only qualify for a small but inexpensive car at a high price.
New-car dealers don't make much profit on smaller, cheaper cars but are required to offer some of the cars to get more of the higher-profit cars from the manufacturers.
There may be other problems than getting financing for a new car with bad credit even if you can prove that you can afford the higher payments. If you haven't had insurance for 90 days prior to getting insured on a new car, you will need to obtain expensive substandard insurance for at least one year before standard companies will offer you a policy.
Very high insurance payments may leave you unable to qualify for or afford new-car payments.
Used cars
Financing a used car at a large dealership may be just as troublesome if your credit is bad. Used-car interest rates are usually higher than those for new cars, and you will still face the same insurance issues if you haven't been insured for a while.
If your credit is very bad (payments 90 days late or more, judgments, repossessions, or bankruptcy), or if you haven't been employed at your job for a long period, your best option would be from a local used-car sales business that offers auto financing with guaranteed approvals.
Buying a used car with guaranteed approval
Your past credit problems are ignored at these dealers who focus only on your current ability to repay. Many of these dealers understand the plight of individuals whose credit problems may have been caused by various factors beyond their control and offer guaranteed approval.
Newer used cars will likely require a larger down payment, but older cars will often have a modest cash requirement.
Because these sellers are taking a risk when providing auto financing to customers who normally couldn't get financing, they may require that an engine cutoff switch be installed in the car. If a payment is late, the cutoff switch automatically disables the car until the account is brought up to date or arrangements are made.
However, there are good points too. Because the car is being financed by the dealer, it is in their interest to provide maintenance until the debt is paid in full. Larger used-car dealers will offer only a limited warranty, which usually expires way before the note is paid in full.
Until you get back on your feet, this deal is your best option for getting back on the road.
