Yes, special financing can be used to buy a new car. However, whether or not you qualify for a special financing auto loan for a brand new vehicle depends on your situation and your budget.
Special Financing for New Vehicles
Special financing is an umbrella term for auto loans issued by bad credit auto lenders. Bad credit lenders are either subprime lenders that are signed up with special financing dealerships or buy here pay here (BHPH) dealers that use in-house financing.
While it’s possible to get approved for a brand new car loan by a subprime lender, BHPH dealers only sell used cars. If you’re on the hunt for a brand new vehicle with poor credit, a subprime auto loan through a special finance dealership is worth a try.
Buying a new car with special financing is possible through a subprime lender, but your available income largely determines the size of the loan you qualify for. The more income you bring in each month, and the more disposable income you have available, the more likely you are to qualify for a loan large enough to finance a new vehicle.
Special Financing Requirements
Subprime lenders vary in requirements, but there are a few common stipulations you’re likely to come across:
- Income – A minimum monthly income requirement of around $1,500 to $2,500 before taxes.
- Down payment – Most subprime lenders require a down payment of at least $1,000 or 10% of the vehicle’s selling price. Remember if you’re aiming for a new car, your down payment requirement may be higher to qualify for financing.
- Valid driver’s license – Used to verify identity, and for you to register the vehicle in your name. Can’t be expired, suspended, or revoked.
- Debt to income ratio – Also called your DTI ratio, it shows lenders your debt compared to your income. Subprime lenders usually require that borrowers aren’t overextended, or at risk of being overextended by taking on the auto loan. If less than 45% of your income is being taken up by current bills and your expected vehicle expenses, you’re likely to meet this requirement.
- Personal references – Most subprime lenders require around five to eight personal references, all with complete contact information. These references can’t share your current address.
- Working phone – Subprime lenders require you to have a working phone. Have a copy of your most recent phone bill to prove you have a working cell phone or landline in your name.
- Proof of residence – Have a recent utility bill or bank statement in your name that proves your residence.
You may need to meet more or less requirements for a subprime lender to determine your eligibility for a car loan. Remember that if you’re aiming for a brand new vehicle, your income and payment to income requirements may be higher than if you were to go for a used car.
What Are My Approval Odds for a New Car?
There are no definitive odds of getting approved for an auto loan on a new vehicle. New cars can be very expensive – averaging around $40,000. It also depends on the type of vehicle you want to buy. Brand new trucks and SUVs can be really pricey, and depending on your income and your overall credit history, it could be tough to land an approval.
As a bad credit borrower, you're likely to have higher odds of getting approved for financing on a used car simply because the loan amounts tend to be lower. It may also be worth considering a certified pre-owned (CPO) car. These vehicles are on the newer side, and come with limited mileage, usually only one previous owner, and many are fresh off lease. They’re typically more expensive than a regular used vehicle, but they also come with some manufacturer-backed warranty coverage and could be a good middle ground between used and new.
What’s Your Next Step?
Even when you know what special finance entails, it’s not always easy to find a dealership that’s signed up with subprime lenders. Here at Auto Credit Express, we want to help you get in touch with dealers that are equipped to handle many unique credit situations – at no cost to you.
With our nationwide network of special finance dealerships, we’ll look for a dealer in your local area once you complete our free auto loan request form. There's never any obligation and it only takes a few minutes, so get started today!