If your credit score is below 620, you will have bad credit. You can still get a car loan, but you will have to pay more in interest.
To make up for the higher interest rate on a car loan for people with bad credit, you should do everything you can to keep your payments as low as possible. Helpful is a good down payment or a trade-in. Experts say that you should put at least 20% down on your car loan to avoid being "upside down." You can also make the loan last longer. This will lower your monthly payment, but in the long run, it will cost you more money.
When you buy a new car, never pay the price listed on the window. The sticker price or MSRP is what the dealer wants you to pay for the car or truck. It is a few hundred dollars more than what the dealer paid, which was the factory invoice price. You can look up the prices on factory invoices online. Remember that the less you pay for the car, the less you have to borrow with your bad credit car loan.
In addition to your bad credit auto loan payments, here are some other numbers you should know:
Depreciation
Depreciation is the difference between the manufacturer's suggested retail price (MSRP) of a new car and what it's worth later on. If you spend $25,000 on a new car and it loses $3,700 in value in the first year, that's almost 15 percent. After the first three years, the rate on most cars settles down to between 7% and 10% per year. The U.S. Department of Transportation says that a vehicle's average life span is about 13 years. Even if you only keep your car for half that long, you will still have it for a few years after your bad credit car loan is paid off.
Taxes and licence plates
If you live in Alaska, Delaware, Montana, New Hampshire, or Oregon, you don't have to pay sales tax when you buy a car because these states don't collect sales tax. You'll also have to pay fees for the title, registration, tags, and pollution control. Depending on what you buy and where you live, these can add up to several hundred dollars. All of these costs can be added to your bad credit car loan.
Insurance
In order to register a car, it must have liability insurance. Your lender needs collision and full coverage insurance to protect their money. Your car's year, make, and model, as well as the deductibles you choose for your coverage, will all affect how much you pay for car insurance. Your insurance rate is also affected by where you live, your gender, your age, whether or not you're married, and your driving record.
Fuel and Maintenance
In 1950, when AAA started doing their annual analysis, it cost 9 cents to drive a car a mile and 27 cents to buy a gallon of gas. In 2006, the total cost per mile is 52.2 cents. If you drive a mid-sized sedan 15,000 miles, that's almost $8,000. And this number doesn't take into account how much gas prices have gone up recently. Nor does it include car loan payments.
Car Loans Already Approved
Last bit of advice: get your car loan before you go car shopping. Getting pre-approved for your loan limits your search to what is possible. If you know how much you can spend, you won't have to worry about finding a car you like only to find out you can't afford it.
Online, it's easy and quick to get pre-approved auto financing. www.fastcarfinance.com is a site that helps people get car loans even if they have bad credit. They offer a free loan quote with no strings attached. A good way to start looking for the car of your dreams is to find out how much you could borrow.
