If My Credit Is Destroyed, How Do I Buy a Car?

A new car can help to rebuild your damaged credit.

A new car can help to rebuild your damaged credit.

If you've had some financial difficulties in the past and your credit shows the scars of battle, you may still be able to find a way to buy the car you want and need. Many new and used car dealers are willing to work with clients with less-than-perfect credit. Knowing how to approach the car buying process and what will be required in lieu of good credit is a start.

Employee Loans

Many companies and businesses offer loans to their employees through a credit union or sponsor bank. If your company has such a policy, make this your first option for financing a new car. With a well-established work history and a built-in relationship, this may be the most friendly lender you will come across. Credit unions and banks are also more likely to work with a client who has existing, long-term accounts like checking, savings or investments. These accounts demonstrate your stability as a client and intention to build a positive relationship with the lender. Approach the bank with which you already do business to secure your loan before moving on to any other options.

Car Loan Specialists

Instead of trying to talk a general lending institution into providing you with a loan, consider approaching a lender who specializes in auto loans and allow them to lay out the options for you. For example, while a large bank may only make auto loans to top tier clients, an auto loan specialist likely makes loans to customers across the spectrum and as such will be ready to supply you with possible methods of finding the funding you need. Nonprime loans are designed for the customer with little or bad credit. They cost more in interest and may offer a host of add-ons and special features. Trim the fat and take the loan for as small a sum as possible, then pay it off as quickly as possible to avoid unnecessary expense. You cannot expect to get the same terms as a buyer with perfect credit, but there is no reason to make the cost any higher than it needs to be.

Shop

Try a few different dealers to find out where your credit has the most buying power. Obtain your full credit report from all three of the national credit bureaus -- TransUnion, Equifax and Experian -- and review them for accuracy. Follow up on anything that may be harming your credit unnecessarily, then visit a few local dealers. Apply for loans with each dealer and see who offers the best deal. While some may refuse you outright, others may request more of a down payment than they would require of a well-qualified buyer. You may also be able to obtain a loan at a higher interest rate than other buyers since the lender is assuming more risk. Compare the offers you get and go with the best one for you. In many cases even a customer with terrible credit will be able to find some way to secure a loan, since the loan will be secured by the car itself.

Have No Fear

The U.S. auto buyer's market has changed drastically over recent years -- as of the date of publication -- to a point at which those with the worst credit are now a viable and substantial part of the customer base. According to Forbes Magazine contributor Dale Buss, first-time car buyers with credit scores of 624 or lower bought more cars than those with better credit in the first two months of 2012. Car companies and car dealers were taking note of the trend and beginning to welcome less-qualified buyers with open arms. If you keep your expectations realistic and do some leg work you can find the car and the loan you need.

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