An older used car with high mileage really doesn't make sense especially if your credit is less than perfect.

Used car question

Here at Auto Credit Express, we recently fielded a question from a borrower with credit problems who obviously had a specific car in mind: "I want to buy a 2005 Subaru WRX STI with 108k miles. Is this a possibility without putting 5k down?"

But aside from the fact that this person didn't mention what the asking price of the car was or where he or she found it – which is also important – nearly everything else about it leads us to answer that "it really doesn't matter how much you have to put down, if you have bad credit there is very little chance you could get a loan for this vehicle."

Here's why:

Used cars and problem credit

The fact that this Subaru is a used car isn't the problem. One of the keys to successfully completing a subprime car loan is picking the right kind of vehicle to finance. Since, for many borrowers, this means choosing an affordable used car, high-risk lenders have no problem simply because it's used.

But the operative phrases here are "right kind" and "affordable." In most cases, the "right kind" means choosing a subcompact, compact or midsize car.

Since we don't know the price, we don't know if this Subaru is affordable (although we'll look at that later), so let's look at whether or not it's the right kind of used car.

Subprime used car lending requirements

So, here are the problems this consumer is facing:

  1. Although some subprime lenders will finance a 2005 used car, most limit vehicle age to 7 years old or newer because they want the vehicles they finance to be reliable. As a result, this consumer is severely limiting his or her chances of a loan approval.
  2. Nearly all high-risk lenders limit a vehicle's mileage to 100,000 – again, due to reliability issues. This WRX STI is over that limit.

    3. bad credit, used car, auto loan

  3. Because older vehicles are less reliable, lenders reduce the loan term and (generally) raise the interest rate as a vehicle ages. So, even if the price is right, the monthly payment on an older vehicle can be more expensive than on a comparable newer one – which means a 2005 vehicle, even if it's acceptable to the lender, might not come with an affordable payment.
  4. Is this vehicle being sold by a dealership or is it being offered by a private seller? Although we don't know this either, subprime lenders typically lend money indirectly through dealerships and don't finance vehicles sold by individuals.
  5. Finally, choosing a vehicle before getting approved is not the way it's done if the buyer has credit issues. Instead of picking out a car first, the lender looks at the buyer's income and expenses and, if the application is approved, sends a "payment call" to the dealer that lists the maximum payment the buyer can afford. The dealer then matches the buyer up with vehicles in inventory that qualify (in terms of price, mileage and model year).

The Bottom Line

It is very difficult getting approved for a car loan on a 10-year-old vehicle with more than 100,000 miles, especially if the buyer has bad credit. Although an older car with higher miles might seem affordable, subprime lenders perceive these vehicles as high risks for breaking down (a real issue, especially for a high-performance car like a WRX STI).

One more tip: Auto Credit Express specializes in helping borrowers with bruised credit find those dealers that can give them their best chances for car loan approvals.

So, if you're ready to reestablish your credit, you can begin now by filling out our online car loan application.