How to Buy a Car With No Credit
Buying a car without any credit is tricky, but possible. As with any large purchase, we strongly encourage doing a lot of research about your financial situation first, and only then making a purchase. While we realize that some people need a car right away and can’t spend weeks or months planning for this big expenditure, a few key things to keep in mind can make the difference between securing the car loan that you need, and being rejected by a car dealer.
Buying a Car With No Credit
Buying a car with no credit has become a more common American experience, especially as wages stagnate and many households have still yet to recover from the financial set-backs caused by the Great Recession. If you fall into the category of late-night Internet users scouring Google for “how to buy a car with no credit,” know that you’re in good company. As we’ve reported here before,over half of Americans currently suffer from subprime credit. The way to beat back becoming yet another statistic? You must curb spending, but also look for ways to make additional income. Only when income outpaces expenses will more people begin to make the jump from the subprime credit market to the healthy credit market.
Earning Extra Income
In the face of the Recession, thousands of U.S. households started small businesses using the power of sites like Etsy and eBay, while many others turned to Uber and Airbnb as part of the “sharing economy.” These additional revenue streams should be things you consider using as ways to accrue extra income, in addition to your day (or night) job.
Steps to Buying a Car With No Credit
Once you’ve done some preliminary research into your personal financial situation, it’s time to start eliminating car dealerships that can’t help you until your credit has improved. While some new car dealers are able to find a bank to finance people with no credit, in most cases, that doesn’t keep your credit from being shopped out to lots of banks before someone takes a risk on you. What this means for you is that your already-bad credit is taking lots of “hits” all at one time, and as a result, you run the risk of ending up with even worse credit and no car to show for it. Be wary of car dealerships that are only going to shop your credit out, and can’t finance you on their own; if you can’t get your local bank or credit union to give you a loan, then your next best bet is a bad credit car dealer, sometimes known as a “Buy Here Pay Here” dealer, or a “tote the note” car lot.
Working With a Buy Here Pay Here Dealer
Working with a Buy Here Pay Here company can be a good solution to buying a car with no credit—but, again: do your homework, first. Not all Buy Here Pay Here dealers are created equal, and many of them have predatory lending with interest rates far above the normal going rate.
So how to spot a good Buy Here Pay Here dealer from a bad Buy Here Pay Here dealer?
A good Buy Here Pay Here dealership should not only take into consideration your credit score, but also your entire credit situation. This includes your housing situation, your job, your personal references, and whether or not you have a clean driving record. Dealerships who try to get a comprehensive overview of your credit situation are more likely to work with you, than those who just want to know what your score is.
Another thing a good bad credit dealership will do is report your good repayment behavior back to the credit bureaus so that, as you repay your loan, you’re also seeing positive gains to your credit score.
Lastly, don’t settle for a Buy Here Pay Here dealer that sells junk. Junk cars will wind up costing all involved parties more, and could even cost you a repossession (drivers who get junk cars are typically more likely to not take care of those cars, and let payments lapse if they don’t feel their dealership will make the necessary repairs).
Look for dealers that sell quality cars, and offer warranties (whether their own, or manufacturers’).
These are just some of the ways to help you buy a car with no credit.
Have any additional thoughts or suggestions for other readers? Please share your thoughts in the comments section!