Immediately after a car repossession, getting into a traditional auto loan can be hard. However, there are ways to get into a vehicle after a while, and you can even work to repair your credit for future purchases with a car loan.
The Lender Giveth, The Lender Taketh Away
When you're financing a vehicle and you start to miss payments, the lender reserves the right to repossess it. Repos can happen after just one missed payment, but it depends on the lender you finance with and the language in your loan contract.
Getting your repossessed car back is typically a hard thing to achieve, sometimes requiring you to pay off the entire loan balance in one lump sum. For many borrowers, once the vehicle is gone, it’s hard to get back.
Moving forward, it’s important to focus on repairing your credit score after the repo since it usually causes major damage. The harm doesn't last forever, though! Repossessions can impact your credit score for up to seven years, but after each passing year, the effects lessen. The older an account is on your credit reports, the less it can hurt your credit score.
An auto loan has the potential to actually heal your credit score after a repossession, but getting into a car loan after a repo can be hard if you don’t know where to go next. Most traditional lenders don’t approve borrowers with a recent repossession, and instead prefer you wait at least a year before financing again. However, that's not always an option.
You typically have two main possibilities to check out after a repo: in-house financing or subprime financing.
In-House Auto Financing
In-house financing means that the car dealer is also your lender. These places are often called buy here pay here (BHPH) dealerships or tote the note used vehicle lots. Whichever name they go by, they’re a good resource for bad credit borrowers to get into a car quickly.
These lots only sell used vehicles, and usually require a sizable down payment. These dealerships are likely to verify your income, driver’s license, and require cash up front for you to be considered for auto financing.
What they don’t normally check is your credit reports or credit score. With a recent or even multiple, repossessions on your credit reports, an in-house financing dealer could be the answer in getting into another financed vehicle.
However, a car loan that you get from a BHPH dealership isn't known to repair your credit. These loans may not be reported to the major credit reporting agencies. A loan that isn’t reported doesn’t have the ability to repair your credit – even if you never miss a payment. If you’re concerned about credit repair after a repo, a subprime auto loan may be for you.
Subprime Car Loans After a Repo
If you have credit issues, subprime financing should be your go-to. Those who’ve had a repossession, a past bankruptcy, or just some poor credit habits in the past can look to subprime lenders for a car loan.
Subprime lenders are signed up with special finance dealers and they look at more than just your credit reports during the approval process. To determine your ability to take on an auto loan, they look at the many moving parts of your financial stability. This means taking a look at your income and expenses, your residency stability, and many other things.
To get into a subprime car loan, you also need to have a down payment. Subprime lenders typically require their borrowers to have at least $1,000 or 10% of the vehicle’s selling price (sometimes whichever is less). A trade-in with equity can also help meet this requirement.
However, those with a repo that’s less than one year old may not qualify for subprime auto financing. Additionally, those with multiple repossessions appearing on their credit reports aren’t likely to qualify.
Once those repos age a little, a subprime car loan could be your way toward credit repair. Subprime lenders report their auto loans to the credit bureaus. With timely car payments and good management of your other expenses, you could be on your way to repairing your credit after a repo.
Dealerships for Bad Credit Borrowers
Your chances of getting into a vehicle after a repossession aren’t shot, as there are dealerships that can work with bad credit borrowers.
If you want to skip the hassle of having to look for a dealer that's signed up with bad credit auto lenders, start right here with us at Auto Credit Express. After you fill out our free car loan request form, we’ll look for a dealership in your local area. There’s never an obligation to buy anything, so let us help you get back on the road.