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Archive for the ‘Auto Financing’ Category

A rumor that has been spread since the 1960′s is that whatever a car dealer gets for a down payment is nothing more than profit. This rumor is in part, true.

An Example

The following example applies whether you’re buying a car, truck or motorcycle with bad credit.

Let’s say that you want to purchase a used car that has a selling price of $15000.00 and the dealer is telling you that because of your bad credit history, you have to put down a 10% down payment of $1500.00. In cases like this, it is very likely that the loan company approving you will only “advance” $13,500.00 on the vehicle in question and this is generally based on loan value. Typically, the dealer will have paid somewhere around loan value for the car and if they sell it at this price, then they aren’t making any profit. So in this common example, requesting that you make a cash down payment of $1500.00 is in fact, $1500.00 of dealer profit and nothing more.

Dealers do have to make money and $1500.00 is a reasonable profit. It’s disheartening however, to fork over a couple weeks worth of income just to make that happen, though.

How to Get A Car with No Money Down

If you have bad credit and need auto financing, and you don’t want to put any money down, there is a solution. Now, hear me out on this, because this information can really benefit you and this information comes from 20 years of experience working in car dealership finance departments…

Buying a car from a private owner. This reduces the amount financed by around 7% or whatever your local tax rates are. This reduces the amount needed to buy the car and less money that has to be borrowed. There are also no dealer “doc”

Have you been told by many a car dealership that because of your bad credit, your financing application would not be approved? The sad truth is that this is the answer you may continue to get if you continue to search for auto financing in a particular way. Let’s see how you can get your auto loan approved.

When going for auto loans with bad credit, your options are greatly reduced. The first place you need to start is in your choice of car. In fact, the first question to ask is actually if you really need the car in question. When that question has been answered, you can then move on to what car is a need and which is mere luxury. The lower the amount you need for the car the easier it is for you to get it.

If you operate a checking account with a local bank and your account is well serviced and operational, do not rule out the possibility of their giving you a loan especially if the amount is low enough, and being a local bank, they can ascertain that due to the ties you have in the area, you would remain to make your payments. Remember, you do not need an expensive car to meet your car need.

If you are desperate enough for a car that you do not mind the rates you pay then you can look at dealerships that offer their own financing. Like I said earlier, it is not the cheapest option and you may likely need a down payment. You can avoid a down payment if you have a fully paid car to trade in. This option should be as a last resort as you would likely end up paying hugely for the car.

Another very viable option I would recommend is visiting online lenders. In fact, many times , I recommend it first because, due to a reduction in their cost of operation and the competition amongst them, they are able to offer lower rates to even applicants with bad credit. In fact, some don’t need a credit check.

Remember, with bad credit, you should be concentrating on repairing your credit so your car loan search should be borne out of genuine need and not just a whim.

Go online now and access low rate auto loans.

If you have a credit score of 480, are in the midst of a bankruptcy that is not completed and have an income of only $800.00 per month, then guess what? You’re not going to be getting an auto loan approved! While there are sources that can get you a real car loan with bad credit, there is simply no such thing as guaranteed auto financing for bad credit. It’s a marketing ploy that lures people into dealerships.

Buy here, pay here. While there are car dealerships that promise to finance anyone regardless of their credit history, like most things – there is a catch. Large down payments are required by these types of establishments and the amount that you have to put down pays for most of the car. The remaining payments that you have to make, along with the high interest rates charged make these dealers profit at the expense of your financial predicament.

There are better ways of purchasing cars with bad credit…

Cash. As hard as it may seem, you can get a reasonable ride that will take you from point “A” to point “B” for a couple thousand dollars. It might not be the best looking car on the block, but will allow you to save money for something better in the near future. Being able to have a title in your hand and own what you drive is much more rewarding than having used that money at a buy here, pay here dealership that you’ll owe thousands to for a similar vehicle.

Online Lenders. There are companies that don’t have problems giving auto loans to people that have bad credit if they merely meet income requirements and basic guidelines. There are a few good companies online that can accomodate you, if you qualify based on your monthly income. Is auto financing guaranteed with these companies, regardless of bad credit? Absolutely not. You will however, have a much better chance of getting a real car loan without the headaches and hassles of using a buy here, pay here car lot.

Several television ads lately have been pushing the concept of zero percent financing for various new vehicles. One offer will allow consumers to finance a new SUV for a 72 month loan, interest free. On the surface, this offer looks tremendously appealing and it could be that way for you if you are the right kind of consumer. Have you considered buying a car with zero percent financing? If so, you need to fully explore just what you are getting with this type of loan or you could end up being trapped in one heck of a mess!

Buying any vehicle that has interest free financing should get your attention. What better way to buy a vehicle then to pay it back over time interest free. However, there are some pitfalls you must be aware of before choosing this type of new vehicle financing and they include:

Few Models Offered – Check the deal out closely and you may learn that only one or two big SUVs qualify for this special financing offer. Naturally, if this is the vehicle you want then keep on reading. If not, you’ll have to pay the market financing rate for your compact car or crossover vehicle.

Your Loan Term Is Too Short — Some interest free deals have loan terms that are too short. A 42 month term means that your monthly payments will be very high while a 72 month term spreads out the costs and lowers your monthly payments.

High Sticker Price, No Negotiation — To receive zero percent financing, the auto dealer may be less willing to dicker with the price. That $35,000 SUV already has an $8000 mark up in manufacturer and dealer profits; additionally, if you buy it at the end of model year its value has already decreased significantly. Ultimately, you may do better by simply taking the rebate along with negotiating a lower price. If you still need financing, you will probably find a decent rate somewhere else.

I Am Upside Down! — There is a financing term that many customers are not aware of that can hurt you later on, especially if you plan on trading in the vehicle at some point before it is paid off. Being “upside down” means that you owe more money on the vehicle than what it is worth. This can happen if you put little to no money down on the vehicle and are financing close to the full amount.

After two years or so, you may think that you are making great progress on paying down that six year long loan. However, you could be in for a rude awakening if you decide to trade your car in as the depreciated value has dropped faster than your pay off amount. Thus, your SUV could be worth $15,600 at trade in, but you still owe $18,100 on your loan. This deficiency of $2500 must come out of your pocket to fully satisfy the loan. At this point you may be able to roll that amount over into a new loan or simply pay it out of your pocket on the spot — either way it will cost you dearly!

Of course, if you are planning to keep your vehicle for more than six years than there is no concern for you as the loan will be paid off and your vehicle will still have some value to it.

So, is there anyone who can benefit from a zero percent loan? Yes, there is and they are the folks who have the money to pay cash for their vehicles. With zero percent financing available these are the types of consumers who recognize an opportunity when it has been set before them and decide to let the financing company fund their deal. Then, instead of plunking down the $28,000 for a new SUV they keep their money in the bank earning 5% or better interest which would result in a balance of more than $36,400 at the end of six years. Looking at it another way you could subtract the $9400 from the price of the vehicle and it would be like they paid $18,600 for their purchase! All they have to do is pay their monthly invoice and the extra money goes in their pockets.

Sure, most consumers cannot afford this option, therefore it is important for you to learn everything there is to know about your auto loan agreement before signing on the dotted line. If you can negotiate the lowest price and get zero percent financing on top of it, than you have a deal that is worth your pursuing.

(c) 2006; You may republish this article to your website with the following author resource information and link left intact.

For those that have less than perfect credit scores, auto financing bad credit is a viable option. Traditional financial institutions as well as credit unions for the benefit of the customers extend the loans for auto financing bad credit. You can also obtain the auto financing bad credit from a number of car dealers and manufacturers. If you have faced bankruptcy, vehicle repossession or foreclosures in the previous year, you could still get a loan.

The US carmakers are also asking for bailouts from Congress

Remember that the big 3 carmakers in the US, have pleaded for more than $34 billion in bailouts. They have also seen their car sales slump in the past quarter and are eager to get their cars rolling. If you already have a car loan, you can get the loans refinanced and pay off the old loans. Based on these points, you may be able to negotiate for a better deal on car financing.

Checking credit scores

Before you apply for the auto financing for not so perfect, check your credit scores. Most banks use the FICO score. The FICO score includes your payment history, loan history, credit card history and the all transactions that you have done. In case you have defaulted on loans, you would have a less than perfect score. Those that have less than 600 score as termed as risky. Obtain your credit report and if you find any loopholes, then report it immediately.

Getting the documentation

After you have checked your credit report, set your documentation in order for getting a car loan. You should have proof of your employment as well as income along with a residence proof. Utility and credit card bills for residence would also do.

Get several quotes from lenders

Depending on your financial health, chalk out the current debt for the auto financing bad credit that you could afford. There are specialized loan brokers that can help you to find the lenders for auto financing bad credit. Or you can search the Internet for the quotes. Either ways you can get several quotes from a number of lenders for getting a loan.

Based on the quotes that you get from the lenders, you can negotiate for a better interest rate and a better term for the bad credit auto financing. Remember that interest rates on new vehicles are lower than that on old used vehicles. Even if you have bad credit, you can negotiate for better rates, and this depends wholly on your negotiation skills.

Many lenders also charge a higher down payment for auto financing bad credit. In most cases it can range between 20-50%. Remember that the loan amount comes down with higher down payments. When you get the loan for auto financing bad credit, remember to pay it on time. If your loan agreement doesn’t charge pre payment penalties, try to pay off the loan. By doing this your credit scores will increase. This will lead to favorable interest rates in the future.

Have you ever gone for more than a week without a car? How about a month, year or more? If so, you know how inconvenient it is not to have your own set of wheels. When it comes to how we use our car, there are two main use categories: a. the necessities, and, b. the nice-to-haves.

Under the category of necessities, we of course have uses for our car like going to work, buying groceries, going shopping for sundries, and visiting the doctor. In terms of nice-to-haves, we have uses like visiting friends, going on dates, going out on the town for a bit of fun, and just taking a pleasant Sunday drive.

The thing is, if you have poor credit due to having a low FICO score, you may be rightfully concerned that you will not be able to take advantage of a car for any of these reasons anytime soon.

If you are looking for poor credit auto financing, here are 5 key points you need to understand:

1. Auto financing interest rates depend heavily on your credit score:

You will not be surprised to hear that getting a good interest rate on your auto financing is greatly dependent upon your credit score. In fact, there is no more significant factor than your FICO score in getting qualified for a good rate.

What makes the credit score so appealing an indicator of credit-worthiness to lenders is that everything – your entire financial history – can be so easily reduced to a single credit score. This makes things easy on lenders. It also makes it easy on people with good or excellent credit scores. Unfortunately, it leaves people with bad credit scores out of luck.

2. Poor credit scores make it harder to get approved or to get a good rate:

Having a poor credit score makes it nearly impossible to get a low interest rate. In fact, many bad-credit individuals cannot even get approved for an auto loan at all.

Fortunately, there is some good news: there are lenders out there who approve applications all day long for people who have a low FICO score. You just have to know where to look.

3. You have more control than you think over your situation:

Given that 95% of auto lenders and financing companies focus so heavily on your credit score, it stands to reason that the other 5% of lenders are trying to capitalize on what the others are overlooking. Namely: the opportunity to extend auto loans to bad-credit individuals.

These companies actually target people with bad scores because they use additional factors – not just the score – to determine somebody’s credit-worthiness. Factors such as employment status and history, residential status and history, and specific details on the credit report (not just the overall score) are also considered by these firms.

4. Comparison shopping pays off:

You need to start by searching for “bad credit auto financing” and related terms. Make sure to find at least 3 companies to which you can apply for a loan. Remember: it is also better to have multiple when shopping for anything – especially an auto loan.

5. As you shop, be sure to record your findings in apples-to-apples way:

As you contact the various lenders you find during your research to get their quotations, be sure you are recording their company name, contact information, and loan terms (including interest rate offered). That way, you can easily go back later and make an apples-to-apples comparison of your findings.

Follow the suggestions in these 5 key points in order to secure auto financing even if you have bad credit.