Car buying can often send people into a tizzy because it can be complicated and stressful – especially if you’re financing with an auto lender and you’ve never done this before. In addition to the make and model of a vehicle, the sticker price, and the lending, there are a number of other items you need to take into account when you’re car shopping. If you’re new to the car buying process, we can help you with the basics.
Car Buying Basics
There can be a lot of things to prepare for when it comes to buying a vehicle. Car shopping is a long process, especially if you have bad credit or you’re a new borrower.
If you have a good credit score and you’re car shopping, the process usually goes like this if you intend to buy at a dealership:
- Choose a vehicle and dealer you’d like to work with.
- Secure financing with an auto lender (either your bank or credit union or a captive lender).
- Secure auto insurance for the car you’re purchasing.
- Sign all documents with the finance manager at the dealership.
- Take delivery of your new vehicle and drive off the lot!
The car buying process can change depending on your credit situation, and how you’re financing. Many people with good credit go through their bank or credit union for an auto loan, and get pre-approved even before they visit a dealer. Pre-approval means these borrowers get qualified for an amount from their financial institution, and once they have that, they can shop at a dealership like a cash buyer.
Good credit borrowers also have a better chance of getting financed through a captive lender like GM Financial and Ford Motor Credit. Captive lenders usually finance borrowers with good to great credit scores, and can offer great deals and low interest rates on certain vehicles.
Buying a Car With Bad Credit
If your credit score isn’t the greatest, you may have better luck getting financed with a subprime lender. These lenders work through a dealership’s special finance department, and the special finance manager works with the subprime lender. The car buying process as a bad credit borrower usually goes like this:
- Find a dealer that works with subprime auto lenders.
- Submit a credit application with the dealership that's sent to one or more subprime lenders.
- A lender that can work with you sets your maximum monthly car payment, and they verify the information on your credit application with documents you supply.
- Choose a vehicle from the dealer's stock that fits your payment budget.
- Secure auto insurance for the car.
- Sign all documents with the special finance manager at the dealership.
- Take delivery of the vehicle and drive off the lot!
The bad credit lending process takes a few more steps, but subprime lenders look at more than a credit score during the loan process, including your income, job and residence stability, debt to income ratio, and more. You need to verify the information with things like check stubs and utility bills, and you also have to provide a down payment.
While working with a subprime lender may take a few more steps, and you don’t choose the car in the beginning, a subprime auto loan can serve as a second chance at financing or as a new borrower's first step in building their credit history.
Car Shopping With a Guide
The car buying process can feel overwhelming, but everyone starts somewhere. Many borrowers start their credit history off strong with an auto loan, or use a bad credit car loan to improve their credit score. Doing this can help them improve their chances of getting better rates for all varieties of new credit in the future.
If you’re struggling with credit issues or you’re a new borrower that’s looking for their first auto loan, start with us at Auto Credit Express. We have a nationwide network of dealerships that have special finance departments with lenders who work with all borrowers in all types of credit situations.
Fill out our free car loan request form, and we’ll look for a dealer in your area!