The purchase of a new car under normal conditions, that is, for borrowers with good credit, is usually as follows: the desired car is chosen, it is financed, the paperwork is signed and the buyer/borrower receives the vehicle.
When you’re shopping for a new car but your credit history and score aren’t in top shape, the process is often different and requires a few more steps.
In this case, you must first find a lender to work with before you can choose a car. Buying a new car means working with a franchised dealer, and they may not always have financing for bad credit borrowers.
It is the lender who indicates the maximum monthly payment for which you qualify, and from there, the dealer provides you with a selection of vehicles that fit those guidelines. Obviously, depending on the dealer and the approved amount, you can choose a used or new car if you wish.
Is it worth buying a new car?
- Choose from the latest makes and models
- The car will have the latest technology and safety features
- You will get warranty backed by the manufacturer
- You can get a lower interest rate than used cars (though still higher than if you had good credit)
However, the pros of buying a new vehicle can sometimes be outweighed by the cons, as well as some bad credit stipulations:
Cons
- New cars are more expensive than used ones
- You may need to give a larger down payment
- You may have fewer options to choose from
- You may require a longer loan term, resulting in higher interest charges
Requirements when you have bad credit
It is clear, when you have bad credit you should go not to a traditional lender but to a high risk lender. By not considering your score as a priority, these lenders consider many factors to grant approval for financing.
These requirements vary by lender, but most use the same basic guidelines:
A valid driver’s license: This serves as proof of your identity and that you can legally drive the vehicle you are purchasing.
Income test: Most lenders require you to earn a minimum of $1,500 to $2,500 per month before taxes from a single job. This must be proven with recent computer generated pay stubs showing your year to date earnings.
Proof of Residency: Proven by a current utility bill or bank statement in your name showing the address listed on your application.
Proof of a working phone: Lenders should be able to contact you and require that you have a landline or cell phone in your name. Prepaid phones do not count.
Personal References: Subprime lenders typically require a list of five to eight personal references complete with names, addresses, phone numbers, and email. These can be family, friends, or co-workers, but you can’t use someone who lives at your address.
Down Payment: Most lenders require a minimum down payment of $1,000 or at least 10% of the car’s sales price, whichever is less.
Even if you meet all of the lender’s requirements, you may have an easier time qualifying for a new vehicle if you have a little backing and reduce the lender’s risk. You can do this with a consignee or a co-borrower. Both can help you qualify for a loan and possibly get the new car you’re looking for.
the right ally
You won’t be able to buy a new car with bad credit if you don’t visit the right kind of dealership: one that has the sub-prime lenders you need to work with if you have credit problems. Undertaking this search on your own can be difficult, unless you have Auto Credit Express .
We are associated with a national network of special finance dealers that have the lenders that will provide real solutions to your situation. To be connected with one near you, you just have to complete our online form , it’s fast, safe and free!
