The auto financing landscape is changing in 2018, and you may have already been turned down for a car loan. But, you still have options available. Now is a perfect time to get into a second chance auto loan before it’s too late. We’ll explain how – and why not waiting to buy should matter to you.

Get Financed While the Getting is Good

Second Chance Auto Financing in 2018: What You Need to KnowA decade ago, the US was hit with the great recession – causing rampant job loss and contributing to a major uptick in bad credit. This led to an increased demand for, and supply of, subprime lending – also known as bad credit car loans, or second chance auto financing. Right now, the subprime lending market is changing again. But this time it’s shrinking.

According to Experian, lenders seem to be tightening the reins on subprime lending. Subprime and deep subprime lending make up less than 19 percent of the auto loan market in the second quarter of 2018, while deep subprime lending hit an all-time low of just over three and a half percent of the market.

Making matters worse, overall interest rates are on the rise. Subprime borrowers already experience higher interest rates than consumers with good credit, and rates are rising in all lending segments (except used car deep subprime lending). If you have bad credit, you’d be wise to take advantage of the current rates before they climb any higher.

What is Second Chance Auto Financing?

When it comes to getting an auto loan with bad credit, the type of lending you qualify for is determined by many factors – but they start with your credit score. If your credit is good to excellent, the other factors involved in qualifying for a car loan are likely to be minimal. If you’re suffering with credit challenges, however, you’re most likely in need of second chance financing.

A second chance auto loan is designed for people who have been turned down for a traditional car loan due to poor or limited credit. If this is the case with you, the first thing you should do is determine why you were turned down.

Do you have a subpar credit score? Are your credit reports full of holes and missed payments? Have you recently experienced vehicle repossession? Do you have a steady income? Knowing the reason your original loan application was denied, and knowing where your credit stands, can help you prepare for a second chance auto loan.

Preparedness is a key factor here because subprime auto loans have different requirements to be met. But, don’t worry – this is a good thing. Lenders use them to look beyond your credit score to really see what’s going on, which gives them a better picture on which to base a lending decision.

Qualifying for a Second Chance Auto Loan

The lenders that offer second chance auto loans are known as subprime lenders. These aren’t lenders you can apply with directly, so you have to visit a dealership with a special finance department to work with one. To have your best chance of qualifying for a car loan with one of these lenders, bring the following documents with you to the dealer:

  • Proof of income – A recent computer-generated check stub, showing year-to-date earned income of at least $1,500 to $2,000 a month, before taxes, from a single job.
  • Proof of residence – A current utility bill in your name at the address listed on the application.
  • Proof of a working telephone – This can be either landline or contract cellphone in your name. Prepaid phones don’t qualify.
  • Personal references – A list of six to eight personal references not living at your address complete with names, addresses, and phone numbers.
  • A down payment – Down payment requirements vary, but $1,000 or 10 percent of a vehicle's selling price is typically what subprime lenders ask for.

It’s also a good idea to have a cosigner on hand in case you’re asked to provide one. Depending on the situation, it’s sometimes only possible to get financing by getting help from the good credit provided by a cosigner.

Finding Second Chance Auto Financing

With shrinking subprime auto lending opportunities, you may find yourself getting frustrated in the search for a second chance auto loan. But that doesn’t have to be the case. Here at Auto Credit Express, we work exclusively with a nationwide network of special finance dealerships. These dealers have lenders that are able to work with people in a wide range of credit situations.

Let us help you find a local dealership. Simply fill out our cost-free, no-obligation auto loan request form, and we’ll get to work matching you with a special finance dealer in your area. What have you got to lose? Start now!