May 18, 2024

How your Credit Score Will Change Car Financing

Many people are surprised to learn how much their credit can affect their ability to buy a car. In fact, your credit score directly affects your auto loan, even if you’re working with a used car dealer.

A Lower Credit Score Often Means a Higher APR

Your APR (Annual Percentage Rate) will vary depending on your credit score, and in some states, your car insurance may be higher if you have poor credit, too. In general, your loan rates could average 16-20% if you have subprime or deep subprime credit, meaning your score is under 600. To put that into perspective, on a $20,000 five-year auto loan, you can expect to pay $483 a month.

Your Salesperson Really Does Want you to Have a Car

If you have poor credit, you may feel like you’ll never be able to get a car loan. Here’s the thing, though: your used car dealer really does want you to have the used SUV or pre owned car you’ve always wanted. Look for used car dealers that offer financing and bad credit auto loans. As long as you are able to prove that you’ve been properly paying your bills for at least six months and have proof of auto insurance, you should be able to finance your car.

How to Prepare to Buy a Used Car with Poor Credit

Always find out your credit score before you start shopping for used cars. If you don’t have credit, take out a credit card and only use it for small purchases you know you can pay back. Always pay your bills on time, and if necessary, set up auto pay to be sure you make the minimum payments. If you already have a low credit score, set a track record of consistent payments.

Don’t be afraid to shop around to find a used car dealer who will work with you. The ideal used car dealer will be able to provide you with a high quality vehicle even if you have poor credit, and should have financing and repair options for customers. With a little preparation and research, you can be on the road with your own vehicle in no time.

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