You may be able to finance a new vehicle even with bad credit. A new car can be a great investment that comes with several benefits. However, as a bad credit borrower, you have to take some extra considerations into account and determine if it's worth the cost.
Benefits of Buying a New Car
It can be beneficial to finance a new vehicle as a bad credit borrower because having a reliable car is important. New vehicles also come with the benefit of being covered by a manufacturer-back warranty, which take care of covered repairs for a set amount of time. New car warranties vary by manufacturer and model, but it's typical to see them cover three years or 36,000 miles.
Another benefit to new vehicles is that they come with some of the latest safety and technology features that many buyers find desirable.
All those perks come at a price, though. New cars continue to get more expensive each year, and the cost can become hard to afford with poor credit. This is partly due to the high interest rates that come with bad credit auto loans.
As a borrower with less than perfect credit, you also typically have to make a down payment. Down payments are a great way to save money in the long run, but having to put down the lower amount between $1,000 or 10% of a vehicle’s selling price – which is a subprime lender's typical requirement – can be difficult.
Getting a New Car Loan
In order to qualify for a new car loan with poor credit, you generally need to work with a lender that can finance bad credit buyers. Because not all lenders offer financing to borrowers in imperfect credit situations, you probably need to work with a subprime lender through a special finance dealership.
These lenders take other factors into account, in addition to your credit score, to consider you for the auto loan you need. Let’s take a look at what subprime lenders typically require:
- Minimum income – Subprime lenders usually require an income of at least $1,500 to $2,000 a month before taxes from a single job. You must provide your most recent computer-generated check stub that shows year-to-date income to serve as proof of income.
- Residence – You have to provide proof of residence, as well. You can do this by bringing in a utility bill in your name that lists the address on your car loan application.
- Phone – Expect to be asked to show proof of having a working telephone. You generally have to provide a bill for a landline or contract cell phone in your name; prepaid phones can’t be used as verification.
- Personal references – Subprime lenders also typically require you to provide a list of five to eight personal references. These must be complete with names, addresses, phone numbers, and email addresses.
- Down payment – A down payment shows lenders that you’re willing to invest in your own success. As we mentioned above, you’re usually asked to provide at least $1,000 or 10% of the vehicle’s selling price, whichever is less.
- Identity – Most lenders also ask that you provide a valid driver’s license or state-issued ID when financing a car.
If you’re unable to meet these qualifications, you may have to look into other forms of auto financing, which also means you may not be able to get the new vehicle you’re looking at. However, as the price of new cars increases, more and more people are turning to used vehicles as an alternative.
In fact, certified pre-owned cars are a good option in this case, because these vehicles are typically just coming off-lease. This means they’re usually only a few years old, have lower mileage, have many of the safety and technology features you’re looking for, and come with a manufacturer-backed warranty that "regular" used cars don’t have.
Finding the Dealership You Need
When you have bad credit, buying a new vehicle isn’t out of the question, but you have to be careful to choose a car that is affordable and reliable. Plus, you need to meet the lending requirements before you can get approved for financing.
If you’re ready to find that new vehicle you’ve been waiting for, Auto Credit Express can help you avoid the hassle of driving all over town looking for a dealer that's equipped to handle bad credit.
Simply fill out our fast and free auto loan request form, and we'll work to match you with a special finance dealership near you that has the proper lending resources. Don’t hesitate any longer, get started right now!