How to Buy a New Car With Bad Credit

Buying a new car is not a small expenditure, so financing will likely be a part of the process. Even if you have less than perfect credit, chances are you can find a lender willing to help you with your new acquisition.

The Standard Credit Process

CarsDirect explains that the standard process for getting a car loan involves providing proof of income and insurance, showing identification, providing proof of residence and supplying documentation for any vehicle you intend to trade in for the new car.

Bad credit might seem like a barrier for getting an auto loan. The good news is that many lenders will still lend to you if your credit score is less than perfect, explains NerdWallet. However, be ready to pay higher interest rates.

Bad Credit New Car Dealers

If your credit score is lower than 700, you should expect higher interest rates. The rates will continue to climb for those with credit scores in the 500s and 600s.

Another possibility is to secure financing directly through a dealer. Many auto dealers have lending relationships with up to 20 different lenders, advises Some of these lenders are likely to have more flexible standards that enable them to work with buyers with lower credit scores. You might also find a dealer that offers direct lending instead of having to go through a separate lending institution.

Smaller Banks

U.S. News and World Report recommends continuing to look for financing if you’re rejected at the first place you apply for financing. Try exploring your financing options at a community bank or a small credit union instead. It’s more likely that these smaller institutions will provide more personalized service. You’ll get a chance to speak with a person about your credit history and your need for financing. Some banks might even have “second chance programs” that are designed to help you get past financial problems so you can improve your credit score.

Try a Co-Signer

If you find that you can’t get a car loan on your own, you might approach a family member or friend to get a co-signer for your loan. This process entails your co-signer agreeing to be responsible for your loan balance. The loan approval process is based on your co-signer’s credit, not yours. You have to satisfy the terms of the loan, making your payments in a timely fashion. If you default, your co-signer is ultimately responsible for the debt.

Other Term Adjustments to Try

Although paying higher interest is probably the most common term adjustment for those with less-than-stellar credit, there may be other options as well. Explore the possibility of borrowing with a shorter term. You might also be approved for a car loan if you have a sizable down payment that you can put toward the purchase.