Getting approved for a car loan following a repossession that's less than a year old is usually very difficult
Car loan question
Here at Auto Credit Express, one applicant that had experienced issues with his or her posed this question to us: "I have had a recent repossession, can you help me get back into a car loan?"
The answer to this question is "it usually depends upon how long it's been since the repossession occurred, unless you're open to alternative financing sources."
Bad credit and repossession
Although most of the dealers in our network work with a wide range of lending sources, the vast majority of these subprime lenders, even many willing to work with borrowers with the worst credit, stipulate that any repossession that appears on a credit report must be over a year old before they'll even consider looking at the application.
So if you have a repossession that’s less than a year old, what should you do? Here are some tips:
• You’ll notice we used the term "vast majority" when we noted the one year time frame most subprime lenders adhere to. The fact is a couple of lenders will ignore a vehicle repossession, as long as it wasn’t with them. This means even though it might be a long shot, it wouldn’t hurt to try to get approved with a dealer that works with subprime lenders. The logic behind this is that even if you’re turned down, it won’t hurt your chances with the only other option available.
• That second option is a buy-here-pay-here (BHPH) dealer. These dealers have what is called "in-house" financing. This means you are borrowing money from the same dealer where you purchased the vehicle (not a bank, credit union or finance company) in order to finance it. As a rule, these dealers don’t check your credit and don’t care when or even if you’ve had a repossession. On the other hand, depending on the vehicle you choose, you’ll probably need a larger down payment and you’ll also be paying a higher interest rate than you would to a subprime lender. But if you really need a vehicle and you can’t wait a year from the date your last car was repossessed, this may be your only choice.
The Bottom Line
In most cases, consumers who have had a vehicle repossessed will need to wait at least a year until they can expect to get approved for a car loan with a subprime lender. While there are exceptions to this rule and buyers should still give it a try, the number of lenders willing to do this is so small that most borrowers should be prepared for a high interest rate and with the large down payment BHPH dealers will require, if they need a vehicle right away.