The current financial crisis is not something you are used to, as it has for many Americans. Although the government is working on a solution to the credit crisis, many people are finding it difficult or even impossible to purchase a car. It’s not that expensive cars are expensive, far from it. But there isn’t much money available to finance them. This is especially true for those with less-than-perfect credit. Customers with poor credit scores are more difficult to get “sub-prime” car loans. If you have poor credit, you can still get a loan.
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- Purchase a brand new Toyota. Toyota Motor Credit is the US’s largest auto lender. They can borrow money from Wall Street at rates other auto lenders cannot match. This means that they can offer loans at lower interest rates to customers, even those with poor credit. Although BMW, Honda and Mercedes enjoy preferential lending from large banks, they do not offer the same terms as Toyota for credit-challenged clients.
- Purchase a new truck, or SUV. The best time to purchase a new truck/SUV is now. Anyone looking to purchase a truck or SUV can take advantage of huge discounts, generous cash incentives and aggressive financing offers. Although these vehicles will be more costly to fill up, people with poor credit may still be eligible for loan offers. You should only buy a small truck or SUV (such as a Toyota Tacoma, Rav4, or a Toyota Rav4) that you are able to afford to fill.
- Have you ever called your credit union? Credit unions offer generous lending guidelines that are beneficial for all consumers, especially those with poor credit histories. Many consumers find them friendly and helpful, and they offer a personal touch. Check with your employer or H.R. department if you aren’t already a member of a credit union. To find out more about your options, please contact the department.
- Take a look at the certified used cars. GM, Ford and Chrysler offer certified used vehicles with aggressive financing and great warranties. This is exactly what Toyota and Honda have done for years. A CPO car may be worth considering if you are looking for a low-cost vehicle even if your credit is not perfect.
- Avoid “buy-here, pay-here” car lots. A buy-here, pay-here dealership might seem like a good option due to the current credit climate. A buy-here, pay-here car loan is not a good idea for most consumers. The payments are not reported to credit bureaus so you won’t get any benefit from paying all your bills on time. Your credit score will also suffer. The second reason is that many of these vehicles aren’t worth the price consumers are asking for. If possible, avoid this option.
- Cash is everything. Auto lenders require substantial cash down payments. Lenders have always found that large down payments from customers significantly reduce the chance of them defaulting on their loans. If you are trying to purchase a car but have poor credit, it is time to save. You’ll be able to get approved by every dollar you put down, so don’t delay any other expenses. Your down payment will need to be between 10-20% of the purchase cost.
- Invite your family members to get involved. Although we don’t advocate co-signing loans, it is possible to help someone with bad credit get a loan. Parents, siblings, spouses and parents are all helpful and must live in the same area. Co-signers are not required if you have a previous car loan. This should not be considered a last resort.
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This credit crisis is likely to be temporary, it’s important to keep in mind. Analysts predict that credit conditions will improve over the next 18 months. It will not be the same as it was in the past (when almost anyone could get a loan for a car regardless of their credit history), but people with poor credit should soon be able to obtain car loans again. You will be able to compare the offers from different lenders. Here is a list of recommended auto lenders that you can register with.