How to Finance a New Car with Poor Creditby Steve Cypher on Thursday, January 3rd, 2013
The high risk car lenders that typically do business through franchised car dealers sometimes offer applicants the choice of financing vehicles other than low mileage used cars.
At Auto Credit Express we know this happens because for over two decades we’ve been helping car buyers with less than perfect credit find dealers that can arrange financing for auto loans.
Franchised new car dealers
Unlike the various BHPH and tote the note dealers that advertise everything from “we finance everyone” to “your job is your credit,” the franchised car dealers we work with offer car loans from lenders that report loans and payments to the major credit bureaus that can actually help establish an applicant’s auto credit.
The rest of the good news is that in the current improving economy the number of sources that offer these loans has increased to dozens of national, regional and local lenders. Since many of these loan programs can include new car financing, it means that in some instances buyers may qualify for a new car.
And while the lending requirements from these higher risk lenders are stricter than those of a conventional car loan, there are still a number of new cars that often meet these standards.
New car advantages
Buying a new car comes with a number of advantages:
• New cars typically come with a comprehensive new car warranty
• New cars often come with free roadside assistance programs
• There is usually the option of purchasing an extended warranty to cover the entire loan term.
• Buyers typically have a choice of colors and options.
New car disadvantages
On the other hand, buying a new car also has its disadvantages. The biggest drawback is depreciation. Most new vehicles drop in value by 15% or more as soon as they’re driven off the lot. This means that any payments made during the first half of the loan are lost to depreciation and buyers typically find themselves “upside down” for at least the first half to two thirds of any new car loan.
At the same time, however, this window of “negative equity” can be shortened with either a large down payment (20% or more) or by reducing the length of the loan term from 60 months to 48 or even 36 months.
Another drawback: auto insurance costs can be more expensive, although the safety systems found on many new cars can result in additional policy discounts.
The Bottom Line
Financing a new car has some obvious advantages. New vehicles are more reliable and also come with warranties and other nice perks. To offset the issue of negative equity, buyers can either shorten the loan term or increase the down payment amount.
Another good thing to remember is that Auto Credit Express specializes in matching applicants with new car dealers that can offer them their best opportunities for car loan approvals.
So if you’re ready to begin reestablishing your car credit, you can begin now by filling out our online auto loans application.