Tips for Purchasing or Leasing a Vehicle with Bad Credit

Common Reasons Why People Have Bad Credit

Before we jump into purchasing a vehicle, it's important to understand how we got here to begin with. Unfortunately, the common misconception about bad credit is that you have managed your finances poorly. However, bad credit is a common experience for many Americans. In fact, there are many reasons why people have bad credit, and knowing why your credit score is low can help you improve your credit rating. Here are some of the most common reasons why people have bad credit:

Loss of a Job

The loss of a job and unemployment often result in bad credit. When you lose your source of income, you have to use the money you have left to pay the bills and buy food. When you are unable to pay off your credit cards, your credit score will suffer.

Sudden Illness

Medical expenses can be an extreme financial burden, especially in cases of sudden illness or accidents. Not only will a person have to pay off the medical bills, they will lose income while unable to work. Sometimes, unpaid medical bills will be turned over to collection agencies, which can cause bad credit.

Divorce

During a divorce, a spouse may have to pay legal fees or child support payments that exceed their monthly income. These expenses can become a huge financial burden, making it difficult to pay off credit cards or other monthly bills.

Death of a Spouse

The surviving spouse will often be responsible for medical and funeral expenses. In addition, the overall household income can decrease, leading to a loss of financial stability. This difficult event can weaken the finances of even the most responsible person.

How Having Bad Credit Can Affect Your Life

Bad credit can affect your financial and personal life to a surprising extent. The majority of lenders out there are very wary of loan applicants with bad credit. Read below to learn more about how bad credit can affect your life, and how you can get the used car loan you need while improving your credit score at the same time.

Trouble Getting Approved for House or Apartment

Before approving you for a house or an apartment, many landlords will run a credit check before asking you to sign a lease. If you have bad credit, it may be difficult to find a landlord who is willing to give you a chance on a house or an apartment.

Higher Insurance Premiums

Insurance companies monitor their customers' credit scores as well. Car insurance companies claim there is a connection between lower credit scores and a higher likelihood of filing an insurance claim. So, even if you have never filed an auto insurance claim previously, your insurance company will still check your credit score periodically (during times that you're ready to renew your auto insurance plan). And, if your credit score is lower than it was when they last ran your credit, they will often raise your premiums.

Difficulty Getting Loan Approval

Having bad credit can affect the amount of effort required to obtain a car loan. Many car dealerships, banks, credit unions, and other lenders will look at a low credit score and reject the loan application without further consideration.

Tips For Purchasing a Vehicle

In today's society, we all rely on our vehicles. They take us to work, daycare, after school activities, dates, the doctor, our friend's place, on family vacations and so much more. Finding an affordable, reliable vehicle that you like and can help you live life to the fullest, often involves taking out an auto loan to finance your purchase.

But what do you do if your credit score isn't very good and you haven’t been successful with your loans in the past? How can you get access to the credit that you need and also ensure that you give yourself the best opportunity to be successful this time?

Be diligent and mindful in your choice of a car dealer and financing solution search. Look for the best fit for you and your situation. There are many different types of vehicles, dealers, and lenders available for people with bad credit, but they’re not all the same. There are many different approaches to the way they do business and what is most important to them.

Choosing a Vehicle

Choosing a Dealer

1. Look for a dealer that specializes in helping people with bad credit on a regular basis. There are many dealers that are consistently looking for lenders to serve the bad credit niche. These types of lenders come and go; this creates an ever-changing environment for the dealer. This volatility affects the dealer’s ability to help customers with credit challenges.
2. Does the dealer have policies and procedures to work with financial hardship, to maintain a positive credit rating with them and do they report that to the credit bureaus? Building a positive credit rating and improving your credit score is not easy and it can take many years. Dealers that specialize in helping people through difficult times, as well as getting the value of affordable and dependable transportation, provide more to their customer base than those that simply sell a vehicle and wish you good luck.
3. Buy here pay here dealers are different than special finance dealers. A buy here pay here dealer does not get paid up front for the contract from a bank or special finance company. They are in relationship with the customer for the entire length of the contract and are committed to helping the customer with affordable and dependable transportation. They rely on the customer to continue to make their payments over the life of the loan. Special finance dealers get paid for the contract once the sale is made and the customer is generally on their own at that point to deal with life’s challenges. Many times, these are the same challenges that caused them not to be successful in the past.
4. Does the buy here pay here dealer have the best resource programs and people to help its customers day to day and in an extreme time of difficulty? This is what separates the best from the rest. Do they have a program available to make your vehicle payment or even possibly pay the vehicle off?
5. How long has the buy here pay here dealer been in business? Generally, this will tell you a few things about the company and their commitment to the customer with bad credit, as well as how successful they’ve been able to service the customer effectively. Are they family owed with values that align with yours, or are they a private equity firm that is more concerned with the bottom line than customer service?
6. How much variety and availability is there in the inventory offered for sale? Does the dealer have 10 vehicles that are listed as “buy here pay here,” or is the dealer’s entire inventory available to you? Some dealers have very few vehicles to offer while a larger dealer, like Oak Motors, may have over 500 vehicles on a regular basis to provide plenty of options.
7. Dependability and reliability are key factors. These are important when evaluating which buy here pay here dealer to select. Does the dealer offer a warranty and if so, for how long and what does it cover? Do they have on site facilities to service the vehicle after the sale? Do they offer service programs to help the customer maintain their vehicle in tip top shape to avoid mechanical mishaps that might otherwise cause the customer to miss payments and default on the loan? Does the dealer offer courtesy transportation or rentals while your vehicle is in service?

Success after the Sale

After the sale and during the life of the auto loan, customers may experience a hardship life event that can cause financial difficulty. It can be anything from a loss of income, a vehicle repair not covered by warranty, change in marital status or family structure, a change in health or vehicle needs, a vehicle accident, etc.

Most buy here pay here dealers have devoted resources and people to reach out and understand the challenges the customer is experiencing, so the dealer can help develop a solution that will work for both the customer and the dealer to maintain a successful relationship; one that allows the customer to have access to affordable and dependable transportation and maintains the positive business relationship with the dealer the customer has built.

If you would like to get started in the search for a buy here pay here dealer that’s only successful when you’re successful and cares about your success, apply for financing today.