Buying a new car can be stressful, but it can be even more stressful when you don’t have good credit. It may be more difficult to find a decent deal with damaged credit, but it isn’t impossible. The important thing is to know exactly where you stand with finances and start doing some research that will hopefully lead you to something that is affordable and works for you and your credit plan.
The first step to getting your car loan if you don’t have the best credit is to make sure that your credit score is actually bad. There are a few different sites that you can get your annual credit report to obtain your TransUnion FICO and Equifax scores. Even if you don’t have the best of credit, you may still have higher chances than someone who has no credit whatsoever. Due to the fact that cars often don’t cost as much as other large purchases, the odds might be in your favor. Plus, cars are easier to repossess than houses, which may give the loaner more faith in the security of the money lent to you.
There is also a good chance that you will have better luck striking a deal with a new car purchase from a dealer than a used one from another car lot. Part of the reason for this is because dealers know that new cars offer more collateral, and should the buyer not follow through, they make more money on it. Also salesmen know that people who buy new cars tend to want to make payments on time and are not likely to have to deal with the prospect of needing repairs, so the money is likely to be paid more regularly. In addition to this, many dealers want to have a good relationship with their customers so that they get referrals from family and friends for more sales.
Once you have checked your credit and if it is truly bad, the one thing you can expect is to pay a higher interest rate on the purchase of your car. When you go visit the dealership to discuss finances, you will have to be able to prove that you do have a job and have other monthly bills that you pay on time. It can be extremely helpful to bring one of your home utility bills to show that you are capable of making timely payments, and that you do have a source of income. You can prove your income by bringing in a pay stub from your latest work payment.
When it comes to actually making the deal with the dealer, you need to be aware of how much you will be paying over time. If you have a very high loan interest rate, you will likely be paying several thousand dollars more than you bought your car for. For example, if you get a high interest rate of about 17% and you are interested in financing a car for $15,000, you may end up spending around $24,000 on that car by the time you are finished paying it off over a number of years. While this sounds less than ideal, it is the reality of having bad credit. Your other option is to try to build up your credit before making the purchase of a new car. Get a lower limit credit card and use that with regular payments over a few months. This will help to build up your credit and lower your interest rates.
Written by Marc Laferierre, owner of Dents Unlimited. Dents Unlimited offers the best auto repair Columbia MO has to offer!