Can I Buy a Car With Bad Credit?

December 15th, 2018 by

Are you looking at your credit score, discouraged, wondering how to buy a car with bad credit?

Well, you’re not alone. Not everyone in this country has the best of credit scores or plenty of cash lying on the table. In fact, there are options out there to find an auto loan that’s meant for you.

Here are some important facts to know before you start hunting for a car loan with a bad credit:

Implications of Having a Low Credit Scorehow to buy a car with bad credit

Generally, lenders need to be confident that buyers will pay back the loan amount on time. That’s why they offer more perks to borrowers having excellent credit scores which are above 740.  This is because the score is a blanket indicator of risk, and for the bank, the lower the risk…the lower the rate.

If your credit score falls below 640, you’re deemed to be a buyer with poor credit or a subprime buyer. In this case, interest rates will be higher because lenders set the annual percentage rate (or APR) based on risk.  If you haven’t paid your bills on time or if you are maxing out all of your available credit lines, your credit score will decline.  The lower the score, the higher the rate.

In addition, you may be more limited to your choice of vehicles you can buy with your bad credit score.  This all gets back to the aspect of risk.  The bank may limit the total amount you can borrow and try to align it with your budget.  This is a calculation of “Debt to Income,” or DTI.  Here is an example of a DTI calculation:


Total of Monthly Payment Obligations on Credit Report:  $1,700

Monthly Rent: $800

$4000/$2500 = .62 or 62% Debt to Income

 The lower the Debt to Income percentage, the lower the risk for the bank.  So income is just as important a factor in this equation as debt.

How to Find Borrowing Success with Low Credit Scores

When you want to know how to buy a car with bad credit, it’s important to know the small things you can do to improve your credit score as fast as possible. Taking six months to rebuild your credit score will strengthen your case but, this might not be possible because you need a car NOW.

In this case, your options are:

  1. DOWN PAYMENT MONEY:  showing the lender that you have come to the borrowing table with several thousand dollars does several things.  Number one is that it let’s the bank know that you are seriously invested in this auto loan with your own hard earned money.  They like this because it reduces the chances that you will let the car loan go to repossession.  Number two, is that it will lower the overall loan amount and get the payment more in line with your income and budget.  This is a key factor.
  2. INCOME SOURCES:  showing the bank that you make addition income is imperative.  Even if you have a side hustle, some lenders will accept proof in the form of bank statements showing the deposits.  But you must be able to prove to the bank that you make the money you say.
  3. CO-SIGNER:  So your credit is a 540 score and the bank has said “nope” to you borrowing money.  Getting a co-signer with a good credit score can move the declination to approval and still provide you with the credit rebuilding opportunity.

Get a Hold of Your Credit Reporthow to buy a car with bad credit

Monitoring your credit score is key especially doing so well in advance of you making a major purchase.  In fact, you should check your credit score regularly on your own. There are various sources where you can gather this information from.  Before applying for the loan, you need to take time for corrective measures in order to improve the score.

In order to run a credit check, you can rely on resources like TransUnion, Equifax, and Experian to provide your FICO which prepares scores based on your payment history and credit balances. So, a FICO score less than or equal to 580 represents poor credit while 695 is the average score that falls in the category of “good” borrowers.

But, you need a report to get a hold on it. Hence, aim for a detailed report and see what factors may impact your scores.

how to buy a car with bad credit

Have Reasonable Expectationshow to buy a car with bad credit

Depending on your credit score, you may have to pay a rate of 12-15% while buyers with good credit standing need to pay a mere 5% as interest on their auto loan. When your credit score is subpar, you must set aside reasonable expectations. In fact, aim to buy a less costly car to accommodate a higher interest rate.

Here, when ascertaining the amount of your monthly installments, don’t forget to add some room for expenses like fuel and insurance costs. In this case, if you are running on a tight budget, consider shopping for a used car instead.

Shop Around for the Best Financing Deal

After identifying potential models that you may purchase, your next target should be to find the best financing option. For this reason, it’s always prudent to have the dealer check with multiple lenders until they find you find the lowest rates possible.

To start with, check online for the latest auto lending installment loan rates.  You also can google search some lenders and they normally publish some average loan rates on their sites.  You can also try to get a loan from a trusted dealership in your area. If your credit score is quite dicey, a dealer can intercede with lenders on your behalf. But before you proceed, lay your focus on annual percentage of the loan as it is given in the agreement.

Where Can You Get Auto Loans With Bad Credit?how to buy a car with bad credit

It is a general misconception that people with a bad credit should settle for the first financing offer they get. Rather, you must get in talks with multiple lenders before going for an option. Well, your options include banks, dealer financial service groups, and car dealerships. Check them all to find the best rates and easiest loan terms.

Once you’ve got the dealer and a loan that’s well within your financial capability, ensure a timely payment of this loan every month. Remember even a single delinquent payment can tarnish your credit ratings. So, be more diligent with repayments.

In conclusion, bad credit doesn’t equal lost hopes of getting an auto loan. It’s better to get the facts together and do your homework. This will help you make informed decisions.

Buy Your Dream Car Even With a Bad Credit Score Only at Dan Cummins!

Want to learn more on how to buy a car with bad credit in Kentucky? Call our experts at Dan Cummins. Reach us at 877-661-2805 to discuss your needs.

how to buy a car with bad credit


Can I Buy A Car With Bad Credit| Dan Cummins Chevrolet & Buick – Louisville, KY