Getting financed for an older vehicle can be difficult if the borrower has less than perfect credit
Choosing a car for a subprime loan
Here at Auto Credit Express, we recently had a consumer make this statement before submitting an application: "The car I want is a 1978 Cadillac Eldorado so if we can get to that dealer that is all I am expecting."
The problem is, if this applicant has bad credit, the dealer that's selling it will have to offer in-house financing, otherwise there is no way this person will be able to obtain financing for it.
Vehicle requirements with poor credit
Vehicle requirements vary from lender to lender, but they all share a number of things in common.
1. Lenders will put a ceiling on a vehicle's age
Most high-risk lenders will finance new vehicles as well as used vehicles that are no more than 7 to 12 years old (with 7 years being more common). The reasoning behind this is that the newer a car is, the more reliable it will be. Lenders know that the chances of repossession increase when the car being financed breaks down.
2. The older the vehicle, the shorter the maximum loan term
The cost of maintaining a vehicle increases with age along with the likelihood of expensive repairs. To minimize this risk, lenders will reduce the maximum term older vehicles can be financed.
3. Lenders will cap a vehicle's maximum mileage
Typically, subprime lenders will not finance a used car with more than 100,000 miles, regardless of the model year.
4. The higher the mileage, the shorter the maximum loan term
High-mileage vehicles are not only worth less than vehicles with average miles (even if they are "highway miles"), they, too also represent a higher risk of major repairs. Since most subprime lenders would not consider a 1978 Cadillac Eldorado, the only way a credit-challenged buyer might get financed is through a buy here pay here dealer that offers in-house financing.
The Bottom Line
To offset the increased risk, most subprime lenders will compensate by reducing the loan term as a vehicle's miles increase. Likewise, the loan term will also be shortened as a vehicle's age rises.
There is one more thing: Auto Credit Express matches credit-consumers to dealers that can offer them their best chances for a car loan approval.
So if you're ready to establish your credit, you can begin now by filling out our online car loan application.