If you’ve tried and failed to get auto financing through traditional vehicle lenders and you’re not sure where to go next, the answer to getting approved could lie in a special finance department at a dealership.
Special Finance Department and Dealerships
Most traditional auto lenders don’t approve borrowers with bad credit scores – in fact, your credit score is a large part of your car buying power. Even if you have other things they're looking for, such as enough income and a large down payment, it still may not be enough to get into an auto loan with a credit union, bank, or captive lender.
This is where special finance departments come in. These departments in select dealerships work with subprime lenders that have the resources to help poor credit borrowers who qualify. Finding a special finance dealer can be a little like looking for a needle in a haystack, and could mean lots of driving around or fruitless phone calls.
However, once you get in contact with a subprime lender, you could be looking at a car loan that can help repair your credit history. Subprime auto loans can also help to increase your chance of qualifying for a better car loan deal in the future!
Qualifying for a Subprime Car Loan
To start the subprime financing process, you need to fill out a credit application with the special finance dealership. This application asks you for information about your income, work history, residency, and other things pertaining to your overall financial situation. Once this is submitted, the dealer sends it to one or more subprime lenders that they're signed up with for review.
You need to meet a few requirements in order to qualify for an auto loan from a subprime lender. These are some items you should gather to prepare for subprime financing:
- Proof of income – Proven with recent computer-generated check stubs that also show year-to-date income. Most subprime lenders require a minimum monthly income of around $1,500 to $2,500 before taxes.
- Proof of residency – Proven with recent utility bills in your name, or recent bank statements in your name, with current address.
- Proof of working phone – Proven with recent contract cell phone or landline phone bill (prepaid cell phones won’t cut it).
- Proof of identity – Proven with valid driver’s license, meaning it’s not expired, suspended, or revoked. Also required to drive the vehicle off the lot.
If you qualify, and your information is verified, a subprime lender calculates a maximum car payment for your personal situation. From there, you choose a vehicle that fits within that monthly payment, and you work with the dealer and finance manager.
Your down payment amount is also determined, and you’re typically going to be asked to provide a list of five to eight personal references with complete contact information (name, address, phone number, email address). As far as a down payment amount, it varies, but expect to need at least $1,000 or 10% of the car’s selling price, sometimes whichever is less.
Once all the paperwork has been completed, you can take delivery of your next vehicle!
The process is a little different from traditional financing, since you would normally choose a car first then find financing. However, subprime lenders try to set their borrowers up for success by drafting loan terms that help ensure that you can repay the loan successfully and give you the opportunity to improve your credit with an auto loan and a good repayment history.
Finding a Special Finance Dealership
Having a poor credit score can often mean being denied traditional car financing. Things have changed in auto financing, and are continuing to change, allowing subprime financing for borrowers with less than stellar credit to be more common than ever.
Locating a special finance dealership might be a big challenge to overcome when it comes to subprime financing. Looking for one can mean lots of wasted time or money, but that’s where we can help!
At Auto Credit Express, we have created a network of special finance dealers across the country and match bad credit borrowers to them. To get connected to a dealership, fill out our quick, easy, and secure car loan request form. It’s free, and there’s no obligation to buy anything, so get started now!