Consumer Car Buying Advice Blog

The term you choose for a bad credit car loan can have a huge impact on how long it will take you to reestablish your credit.

Bad credit car loan choices

Even in today’s poor economic climate, if someone has bad credit, there are still a number of choices available when it comes time to buy a car. Most dealers now have a special finance (subprime) department to help customers with bad credit buy a new or used car. But nineteen years ago, when Auto Credit Express first began in special finance, there were only a handful of national lenders in the U.S., and none in Canada, that catered to people with bad credit.

At that time, “in house” or “buy here pay here” financing at small used car lots was more popular. These “we finance” car dealers would extend credit directly to consumers so they could buy a car from their lot. There were few finance companies that serviced the bad credit market, and lenders that did offered only short terms and high interest rates.

That was then, this is now

Over time, more and more finance companies entered the bad credit car loan arena. To stay competitive, these lenders had to offer more competitive payments, which meant better (and lower) interest rates, as well as longer repayment terms. The first bad credit auto loans, for example, only offered 48 month maximum loan terms. Today, it’s common for a person with bad credit to finance a newer car for 60 months, while some subprime automotive lenders even offer 72 month financing.

A longer repayment term is beneficial: it will result in either a lower payment or it will allow you to buy a more expensive vehicle and retain the same payment. If you have bad credit, however, a longer repayment term may do you more harm than good. At Auto Credit Express, we’ve always recommend that consumers with bad credit buy an affordable car that suits their immediate needs, not a vehicle that looks good in their driveway or impresses their friends and co-workers.

Recommendations

If you have bad credit, we recommend buying a car and financing it through a national auto finance company (that reports to the Experian, Equifax and TransUnion credit bureaus), not a “buy here pay here” lot. The vehicle should be financed for as short a term as possible (for example, 24, 36, or 48 months). If you make all of your car loan payments on time, this short term financing will allow you to trade in your vehicle approximately half way through the loan term (or even sooner if you are able to pay more than the minimum monthly amount). The next car can then be financed at a better interest rate.

Follow the plan

After your first bad credit car loan, your credit may not be completely re-established and your credit score (FICO score) may still not be high enough for the most highly qualified buyer interest rates. If this is the case, finance the next vehicle with a short term, as well. Keep doing this until you qualify for the best interest rates available. Once you qualify for the best interest rates, then, and only then, should you consider financing your dream car for an extended term.

We can help

At Auto Credit Express, our business is to help people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. If you have any additional questions, our web site can help you determine how much car you can afford and, unlike other sites, our toll free number is listed on every page in case you have any additional questions.

When you decide to buy a car, our credit application can be filled out in the comfort and security of your own home. For more information, please visit us at www.autocreditexpress.com.

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