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It can be challenging to buy a car. You must consider your eligibility for vehicle financing in addition to the fact that it is a significant financial choice. In light of this, it may be difficult for someone with bad credit to qualify for an auto loan and it may be difficult to locate a location that offers simple financing. Fortunately, there are numerous places where auto financing is simple, including lots for people with terrible credit. There are a few additional choices for simple auto financing outside dealerships that provide auto loans for people with terrible credit.

Dealers who work closely with a manufacturer, such as independent and franchise dealerships, both offer in-house financing. This could be done through a manufacturer-owned finance firm, a dealership, or a different entity. Whatever the circumstance, it all comes down to the financing options that the dealership is providing for you. You can submit an application for an auto loan when you purchase a car. If you’re given the green light, you can utilize this loan to pay for your car.

Most experts often view dealer financing as a last resort. Dealers profit greatly from in-house financing since they mark up the rate you are presented with. For example, if you could qualify for a loan at 7 percent through a bank, you may receive an offer of 9 percent through dealership financing.

The best course of action is to get outside financing first. Banks, credit unions and online lenders all offer auto loans at competitive rates. Once you’ve been approved for another loan, it’s easier to negotiate a good deal with dealer financing if that’s what you want. Otherwise, you’ll be at the mercy of whatever finance company the dealer uses.

Normal Car Dealerships

As mentioned above, it might be difficult to qualify for auto loans with bad credit at typical car dealerships. The reason for this difficulty is that normal car dealerships use credit scores to determine loan eligibility. Hence, having little to no credit may make it nearly impossible to qualify for auto loans at most used car dealerships near you.

Credit Tiers

In determining loan eligibility at normal dealerships, specific credit tiers are used in deciding loan terms and how much money someone qualifies for with an auto loan. Whether you want to buy a new or used car near Columbus, Ohio, or anywhere else, these credit tiers are universal across every dealership that uses credit for loan eligibility. The better your credit, the better the loan terms and interest rates. If you take a look at the list below, you can see every credit tier, the scores that define them, and the loan interest rates associated with each one, according to Experian:

  • Superprime (781-850): 3.61%
  • Prime (661-780): 5.38%
  • Nonprime (601-660): 9.8%
  • Subprime (501-600): 15.96%
  • Deeper Subprime (300-500): 19.87%

Bad Credit Car Dealers

If you are in the subprime credit tier or lower, you will likely find it challenging to qualify for auto financing. Fortunately, bad credit car lots cater directly to buyers with bad credit. In order to help bad credit buyers, these dealerships use factors other than credit when determining eligibility for auto loans with bad credit. Typically, all it takes is a few questions from these dealerships to understand your loan eligibility. The most common factors that these dealers will ask about can be seen in the following list:

  • Income-to-debt ratio
  • Employment status
  • Living situation

Other Lenders

Aside from bad credit car lots, there are many other options for vehicle financing. Some of them even accommodate buyers with bad credit, meaning that there are multiple resources for those trying to qualify for a loan with bad credit. For example, there are countless online vendors that offer auto loans for bad credit. Although, with online lenders, you should always stay weary of scams and predatory lenders, avoiding anything that looks unreliable or too good to be true. 

Watch For Deals On Auto Financing

The final piece of advice for anyone trying to easily qualify for auto financing is to take advantage of any deals or specials being offered. Many dealerships offer special interest rates on loans or trade-in incentives during the holidays or at the end of the year. Therefore, you should always stay on the lookout for deals, especially during significant times of the year. These deals can help to save an exponential amount on auto financing while also affording many people the opportunity to qualify for loans for which they would otherwise be denied.

Read Also: What Are The Options for Financial Assistance?

Dealer financing is designed to maximize convenience. You will typically be able to find, test drive and buy a car all on the same day. And while experts frequently recommend avoiding certain sales tactics, if you know you’re going to finance through the dealership, the steps are simple.

Find and test drive cars

Unless you are absolutely pressed for time, visit multiple dealerships. Your day spent test driving cars should be separate from your day negotiating price. You are under no obligation to do everything at once, and in fact, it may get you a better deal if you spread it out.

Salespeople may try to pressure you into a quick sale by citing scarcity. But if you are looking for a common trim on a common make and model, you will be able to find the exact same car again if it does get sold. So, if you are set on financing through a dealer, don’t be swayed by flashy pitches designed to squeeze more money out of you.

Meet with the dealer’s finance office

This is the crux of negotiation. Don’t show your hand too early, of course, and keep the focus on overall cost rather than monthly payment. It’s best if you show up preapproved by another lender. This gives you more room to discuss exact terms.

Dealership financing isn’t necessarily the worst choice, though. However, before submitting a credit application at the dealership, you should already have financing in place from a bank or another lender. You now have more wiggle room when negotiating your auto loan.

Dealerships might be able to get you a loan if you don’t qualify for outside finance. Just be aware of the charges, get a car that is within your budget, and figure out your monthly payment to make sure you won’t be short on cash.

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