When you’re looking into buying a new car, your credit can be a cause for concern. If you know your credit score is less-than-stellar, the already stressful process of car buying can be taken to a whole new level. But that doesn’t mean that you’re out of the running for a vehicle. Even with a lower credit score, you can still get a good deal on a car by doing a bit of research beforehand.
What Lenders Look For
Before you can talk about the credit score you need to buy a car, it’s important to know what lenders are looking for. In your application for a car loan, lenders don’t only want to know your credit score. They’ll often look at your credit score in combination with your income,your debt-to-income ratio, time on job, and length of residency at one address. If your credit score isn’t very strong, lenders will look for other areas of stability to get you approved.
Your credit score is usually used as a starting point for lenders. Of course, those with higher scores have higher approval odds, but again, this is not the only factor. Your credit score can also impact the interest rate you receive, but we’ll talk more about that in a moment.
The other factors to keep in mind are your debt-to-income ratio. As the name suggests, this data point compares your income to the amount of debt you currently have. Lenders will look at this ratio to see if you can truly afford to add another payment to your monthly load. Additionally banks like stability. If you’ve been at the same job or address for several years it will greatly increase your odds for approval. You might have had issues with payments in the past, but the fact that you can hold a job for several years goes a long way with many lenders.
How Your Score Can Impact Your Payments
So, we know that your credit score impacts whether or not you get approved for a loan. But did you know it can also impact the amount that you pay for your vehicle? Those with lower credit scores will likely be offered higher interest rates than those with higher credit scores. Again, you can still get a loan; you just might wind up paying a little bit more in the long run. If you’re willing to pay a bit extra throughout the life of your loan, or if you genuinely need a vehicle now, it’s still worth it to look for a loan.
Keep in mind that interest rates can fluctuate no matter what your credit score is. Interest rates are determined by the conditions of the market as well as what, and where you borrow. It’s not a bad idea to shop around to see where you can get the lowest interest rate. If you’re not in a big hurry to buy a car, you can also wait for a couple of months to see how the market changes. You must also bear in mind that the type of vehicle you are purchasing will have a huge impact on your interest rate as well. The newer and lower mileage the vehicle has, the better rate you will get. Banks take heavy consideration into vehicle you are attempting to finance when determing the rate to give your loan.
What is a Good Credit Score Range to Buy a Car?
You may have heard that you need a good credit score to buy a car, but that’s simply not true. There’s no one range that your credit score needs to be in for you to buy a vehicle. Each lender has its own requirements when it comes to granting loans, so it’s impossible to give a hard-and-fast rule as far as the minimum credit score you should have.
Plenty of people with credit scores as low as 450 are able to purchase vehicles. If you fall into this category, you will likely fall into what is called the subprime category. As we mentioned, you can expect a higher interest rate, but as long as you have a decent down payment and steady income there are plenty of lenders who will give you a shot.
How to Afford a Car with Bad Credit
So, if you have bad credit and you really need a car, how can you make it happen? The first thing to consider is your down payment Down payment is one of the most important factors in your approval, as it shows the bank how invested you are in the loan. Banks typically want to see 15%-20% of the sales price with a subprime credit score. If you can afford more, even better as you can then negotiate better terms with the lender.
If you are not able to come up with a strong down payment and are in dire need of a vehicle, you may benefit from having a cosigner. If you have someone in your life with good credit, see if they’re willing to cosign your loan application. Having this person vouch for you and sign along with you can reflect positively on your overall application, potentially leading to lower interest rates and better approval odds.
Finally, opt for a used car if at all possible. The vast majority of used cars are incredibly reliable, and they also tend to be much less expensive than new cars. Even if you do have to pay a higher interest rate, you will still find yourself saving lots of money compared to purchasing a brand-new vehicle.
Work with FA Financing
When you’re trying to get a car loan with bad credit, it can also help to work with a lender specializing in subprime auto lending. FA Financing has more than 20 years of experience helping those with bad credit in San Diego County get approved for the auto loans they need. We know how to highlight your strengths and present your application in the best possible light to get you approved. We’re happy to work with those with low credit scores as well as buyers in other circumstances such as multiple repossessions or a recent bankruptcy. Getting an auto loan with a bad credit score can seem stressful, but it doesn’t have to be. Contact FA Financing today to see how we can help you.
