Nearly half of all car purchases in the U.S. are paid for with loans. When you add this to the fact that 30 million Americans have credit problems, you can see why bad credit car loans are so popular.
Bad credit car loans are not hard to get, but they have higher interest rates than prime loans. People who have gone bankrupt can still get a good deal on auto financing if they look around. Whether they buy new or used doesn't matter.
Car Loans for People with Bad Credit: Buying a New Car
Buying a new car is the best way to drive with peace of mind, safety, and ease. If you buy a new car, you can choose more of the extra features than if you buy a used car. You will also get a new warranty that lasts much longer than the extended warranties you can buy for used cars.
Getting "upside down" on a bad credit car loan is a risk when you buy a new car. Having a good down payment of at least 20% can help you avoid this. Another way is to choose a car that will sell for a lot of money. This will slow down the rate of loss.
Depreciation is the difference between the Manufacturer's Suggested Retail Price (MSRP) when you bought the car and what it's worth now. A car that costs $25,000 will lose about 15% of its value in the first year, and between 7% and 10% each year for the next two years. Cars with well-known brands keep their value longer and are less likely to lose value faster than the loan on the car.
Used Car Loans for People with Bad Credit
If you want to keep your monthly payments low, it makes sense to buy a used car. Used cars are better short-term collateral for lenders than new cars because they lose value less quickly. On the other hand, some lenders will shorten the length of bad credit car loans and raise the rate.
When you buy something used, you might be able to afford a more expensive model than if you bought it brand new. You could buy a new Hyundai, a two-year-old Taurus, or a six-year-old BMW for about the same price.
Buying a used car from an individual will be less expensive than buying the same car from a dealer. You should ask the seller the following things:
- Have you owned the car for a long time?
- Has the car been in an accident or had its paint job changed?
- When is the next state inspection and emissions test?
- How often do you change the oil and filter?
- Why do you want to sell the car?
The first thing to do is...
You can easily find out if you qualify for a bad credit car loan online at sites like www.buyaauto.com before you start looking for a car. Make sure you borrow enough money to cover all of the costs, like dealer prep fees if you're buying new, licence plates, title and registration fees, etc., if you're buying a used car.
Remember that the total cost matters more than the monthly payment. If you make a bad credit car loan last longer, you will have to pay more interest. For example, if the loan term goes from 48 months to 72 months, the payments on a $20,000 loan can go from $500 a month to $360. But this will cost about $2,000 more over the life of the loan, or 10 percent of the loan amount.
