How to Work with Car Dealers That Accept Bad Credit

| Tedis Baboumian |

If you need to buy a vehicle but have less than perfect credit, the good news is that there are options for financing a vehicle even with bad credit. You can expect to pay more for financing than you would if you had good credit, but if you plan well, you can avoid being taken advantage of. Here’s how to work with car dealers that accept bad credit.

Compare Interest Rates

Don’t just walk in and buy a car from the first lot that advertises help for people with bad credit. While you know you will have to pay a higher interest rate than would someone with good credit, that doesn’t mean you have to take the first offer. Find out the rates being offered by banks and credit unions and look into lenders who offer car loans for bad credit before working directly with a car dealer.

Consider How to Get a Better Deal

The larger the down payment you can save before you try to buy a car, the less you’ll need to finance. A smaller loan amount makes you appear less risky to the lender so you can get a better deal. If you have a friend or relative with good credit who is willing to cosign for a car loan, getting a cosigner can also help you get a better interest rate and better loan terms.

Buy Here, Pay Here

Car dealers that offer buy here, pay here typically target people who have limited income or credit challenges. The interest rate on financing through this type of car dealer is usually much higher than the rates charged by banks or credit unions. There may also be fees you have to pay to get this financing.

If you decide to go to one of these dealers, take your time and make sure you understand what you’re agreeing to before signing anything. Also make sure you know the value of the vehicle you’re considering, since buy here, pay here car dealers sometimes charge more for a vehicle than it’s worth. If you’re trying to improve your credit by financing a car, ask them whether they report to all three credit bureaus. Some may not report to credit bureaus at all, which won’t help you to improve your credit score.

Improving Your Credit

If you’re not happy with the financing options you have when you have bad credit, the best thing to do is postpone your purchase, if you can, and work on improving your credit. Pay all your bills on time and avoid using more than 30 percent of your available credit on credit cards. Check your credit report to make sure there isn’t any inaccurate information being reported.

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