If you have credit issues and need a vehicle, its age and mileage, among other things, is important to lenders. This means you probably won't be able to finance an older model with very high miles.
Age and Mileage Questions
Here at Auto Credit Express, we get hundreds of questions every month from car buyers who are facing challenges with their credit situations. Just last month, we received this question:
"Hi, I am Emma. I am trying to get a loan to buy this truck. It's a 2004 Ford F-150 with 197,000 miles and the price is $6,995. I need about an $8,000 loan because I don't have the money for a down payment now. Can you please help me?"
There are a number of parts to the answer, so let's begin.
Auto Credit Express is Not a Lender
To begin with, it looks like Emma might be thinking Auto Credit Express is a lender. We are not. What we do is match consumers with less than perfect credit to dealers in their area that have special finance departments and are willing to work with credit-challenged car buyers.
Does Emma Have Bad Credit?
Emma doesn't tell us if she has bad credit, but we're going to assume that she does.
The Vehicle is Too Old with Too Many Miles
Age and mileage are important to subprime lenders because the older a vehicle is and the higher the mileage, the greater chance it has of breaking down. When you consider the fact that many consumers with bad credit are working with limited budgets and, in many cases, can't afford to pay for major vehicle repairs, this often leads them to stop making payments on the vehicle.
Therefore, subprime lenders typically cap a vehicle's mileage at a maximum of 100,000. Age is also a concern and these lenders also typically cap a vehicle's age at no more than 10 years.
Keep in mind there are always variations to these rules. A few lenders will finance a vehicle up to 15 years old and with as many as 130,000 miles. But the chances of this happening vary, and depend upon which subprime lenders a dealer is signed up with.
In Emma's case, even though truck she's looking at is 13 years old, which might be acceptable to some lenders, the mileage is way too high.
The other thing to keep in mind is the fact that buying an older vehicle won't necessarily keep your monthly payment low. Most subprime lenders will finance a new vehicle for up to 72 months. A vehicle as old as the truck Emma is looking at probably can't be financed for longer than 24 months. The interest rate will also be higher, as most subprime lenders charge higher interest rates as vehicles get older. This means that despite the fact that she might only need to finance $8,000, the monthly payment could be more than she could afford. The principal payment would be over $330 a month and the interest payment could add another $100 to that figure.
The Appraised Value
In addition to age and mileage, a subprime lender will look at a vehicle's appraised value. Not only do they want to be sure a customer isn't paying too much money, they'll want to make sure that, if they have to repossess the vehicle, they won't lose too much when they have to turn around and sell it at auction.
Emma hasn't told us the body style, bed length, drivetrain (4x4 or 4x2) or trim level of the truck she's looking at, so we had to guess. In this case, we determined the value of an XLT Super Cab 4x2 with a 5.5-foot bed. According to NADA, it has a clean retail value of $7,750 which means, depending upon the model, the price she's paying might be right in the ballpark.
Down Payment
Emma says she doesn't have a down payment, or even money to cover tax, title and license fees. That could be a problem, because subprime lenders typically want either 10 percent or $1,000 for a down payment, whichever is less.
Dealer or Private Party Sale?
Finally, we don't know where Emma found this truck. Is it on a dealer's lot, or is she thinking of buying it from a private party?
The problem with a private party loan is that most subprime lenders only work through licensed car dealers. If Emma is looking on a dealer's lot, has she asked the dealership (if she has bad credit) if they finance people with credit problems? If they don't and she has bad credit, then she's probably out of luck.
The Bottom Line
Here is what we suggest: If Emma has bad credit, she should keep an open mind and think about getting a vehicle she needs, rather than something she wants. Once her credit is back on track, then she can pick and choose from any vehicle that she can afford, regardless of its age and mileage.
If you find yourself in this position, we want you to know that Auto Credit Express is here to help. We have a nationwide network of car dealerships that are trained in special finance. This means they have the lenders and know-how to help people in all types of credit situations.
Our service is free, fast and puts you under no obligation to buy anything. See what we can do for you by filling out our car loan request today.
