Credit not so stellar? You're not alone. Millions of Americans seek lending help every year while trying to get the vehicles they need. If you're new to the lending game, or just new to using credit, we've got the inside track on what to expect to pay upfront on your next bad credit auto loan.
What Makes Up Car Loan Costs?
The sticker price is just the starting price when it comes to financing a vehicle. The sticker in a car window at a dealership is called a Monroney sticker, and it can tell you a lot about the vehicle you're looking at. All the information you see starts with a manufacturer's suggested retail price (MSRP), but this isn't the final price you're paying for your loan.
On top of the price of the car, you also have to pay a number of fees in the auto loan process, including:
- Dealer add-ons
- Doc fees
- Tax, title, and license fees
- Interest charges
Many of the fees associated with buying a vehicle can be rolled into your purchase price, but this means paying more overall when interest is charged. For many borrowers, especially those with poor credit, a down payment is required to qualify for auto financing as well and needs to be paid upfront.
Save Money Buy Paying Upfront
In order to save the most you can on your car loan, pay your tax, title, and license fees upfront along with your down payment. This way, you avoid paying interest on them and save money in the long run.
The amount you have to pay depends on where you live and the purchase price of the vehicle.
When you get a subprime auto loan through a special finance dealership, taxes and fees are typically included since financing is based on the out-the-door price of the car. In cases such as private sales and direct loans, though, your tax, title, and license fees aren't included. Be sure to come to these sales with cash in hand, or a pre-approval that's large enough to cover the total cost of financing.
Remember the more money you can pay upfront, the more you can save overall. It's a good idea to plan for the payment of your taxes and fees ahead of time, and remember that not all the down payment has to be in just cash.
Down Payments: Combining Cash and Vehicle Equity
If you bring in a substantial down payment for your auto loan, you can open up lending possibilities and maybe even gain the chance at a better vehicle. Generally, subprime lenders that work with bad credit borrowers have a minimum down payment requirement of at least $1,000 or 10% of the vehicle's selling price. Sometimes, these lenders may accept the lower amount. This amount of cash can be hard to come by all the time, so lenders accept trade-ins as well.
If you currently have a car with equity – where you owe less on its loan than it's valued at – you can use this to make your down payment or combine it with cash for even more bang for your buck. If you have a vehicle you owe free and clear, its entire value is equity. If you owe more for your car than it's worth, you're in a negative equity position and may run into some trouble trading in your car, but you may not be out of options.
Ready to Roll On Your Next Car Loan?
Now that you know what to expect to pay at the beginning of your auto loan, it's time to find a dealership that's signed up with the lenders you need when you're struggling with credit. A lower credit score can make it more difficult to find the lenders you're looking for, but it doesn't have to stand in your way of a car loan!
At Auto Credit Express, we've gathered a nationwide network of dealerships that have been helping credit-challenged consumers get into the loans they need for over 20 years. Let us add your auto loan experience to our list of successful matches – simply fill out our car loan request form. There's never any obligation to buy, and the process is fast and free. Get started today!
