Twelve years ago when I first started helping people buy a car with bad credit there were only a few lenders willing to give people with credit problems a traditional type of loan. When I say a “traditional type of loan”, I mean a lender that reports to all three credit reporting agencies and had monthly repayment terms via a traditional payment book.

At that time, it was more common for consumers with bad credit to buy cars from local “We Finance” used car dealers that had a buy here pay here “pay as you go” program. With these programs, the consumer visited the car dealer weekly to drop off their payment. In most cases, the “rent to own” vehicle was an older car valued between $1,000 and $5,000.

It was a major step toward rebuilding credit when national finance companies entered the sub prime lending arena around 15 years ago. The first special finance lending programs had repayment terms of 24, 36, or 48 months. Rarely would a lender approve a loan with a 60 month repayment term. These short repayment terms allowed consumers to buy a better car than they could purchase at a buy here pay here used car dealer. Based on our data, the average car purchased utilizing these terms was around $10,000.

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