A car straw purchase deal is when someone who qualifies for an auto loan purchases a new or used vehicle for someone else who is unable to qualify. This is illegal, and considered fraud. If you’re caught doing this, you could face major consequences.
Why Is a Vehicle Straw Purchase Illegal?
A straw purchase is considered fraud since loan documents contain provisions that the borrower must also be the primary driver. All lenders include these rules in their contracts; this is helpful in the event that the car needs to be repossessed, it makes it easier for them to find it.
If the lender finds out a straw purchase deal occurred, they have the legal right to pursue the borrower. Depending on the state you live in, a straw purchase could mean hefty legal fines, repossession, or revoked licenses for both the buyer and the driver involved in the straw purchase.
What if I Have Bad Credit?
Making a straw purchase deal isn’t worth the legal trouble. If you need a vehicle but your credit is holding you back, don’t think you’re down for the count. The key is to work with a subprime lender.
These lenders offer loans through special finance dealerships, and understand unique credit situations. As long as you meet their financing conditions, which include income and employment requirements, you shouldn’t have an issue at least being considered for an auto loan.
To boost your chances of getting approved for a car loan, you may want to consider adding a cosigner with good credit. A cosigner’s main role is to help you get approved by attaching their name and credit to the loan.
This arrangement means they're legally obligated to the loan, so the cosigner has to take over the payments if you, the primary borrower, can't make them. This gives lenders extra assurance and makes them more likely to approve you.
If you’re unable to qualify, or don't have any credit at all, you could go to a buy here pay here (BHPH) dealer. Unlike special finance dealerships, BHPH dealers are also lenders. What makes them great for buyers with bad credit or no credit is that they don't typically look at your credit score.
Instead, they qualify borrowers based on their income. As long as you make enough to afford the payment and can meet the down payment requirement, you have a good chance of being approved.
What if I Have Limited Income?
If, on top of having bad credit, your income situation isn’t so hot, you have another choice that can help you get an auto loan: add a co-borrower.
If you have a spouse that meets the minimum income requirement, you could add them to the loan. Lenders combine your incomes when a co-borrower who is a spouse is added, so you can both qualify together. Both a primary borrower and a co-borrower share ownership rights to the vehicle and responsibility for making sure the loan gets paid.
The Bottom Line
Car straw purchase deals are considered fraudulent and usually occur when a consumer with good credit purchases a vehicle for someone with limited or poor credit. You should never do this – instead, let us help you get the auto loan you need.
At Auto Credit Express, we’ve been matching credit-challenged consumers to local dealers for over 20 years, and we want to help you, too. Getting started is a breeze, simply complete our free and fast car loan request form, and we’ll get right to work connecting you!