So what about clients who are hell bent on financing a car even with bad credit? Getting a car with bad credit requires only six simple steps, and here they are.
Get Your Credit Report (And Know What it Says)
When dissecting car dealers who are a good fit for my clients, each cash is relative. I tell my clients to look for dealerships who specialize in helping folks with bad credit get a new ride, but also to look for dealers who advertise being able to work with circumstances similar to theirs.
For instance, if a client has a foreclosure, debt that is collection or a recent repossession I tell them to seek out a dealer who advertises they are able to work with credit problems like that, and contact that dealership via email before visiting the lot. As an old car dog, we knew that once we got someone on the lot, we had an 80 percent chance of selling them a car -- even if they couldn't afford it. Thanks to this insider knowledge, I tell my clients to ask for financing details ahead of time.
I help many of my clients write an email and in that email we ask about the average down payment and bad credit interest rates (knowing it's going to be high), specifying that we are only interested in the worst-case scenario details. If it is a "buy here, pay here" lot, we ask what the payment terms are. I want to make sure that my clients can fit the payment requirements into your budget before letting the dealership pull credit, and definitely before they commit to going to the lot.
Budget Correctly for Your Payment
Once we have some numbers, we sit down and see if that astronomical payment will fit easily into my client's budget. A mistake I saw many of my customers make was overstretching on the amount of car they could afford, because they were overly focused on payments, not on the bigger picture. When you are buying a car with damaged credit on your own, there really isn't any getting around getting fleeced on the interest rate. This means you are paying a ridiculous amount of money on an asset that only loses value over time. Instead of making the mistake I saw far too many clients of mine make, my advice is to finance a less expensive car that will get you from one place to another, safely, for a couple of years, and never finance anything longer than 36 months.
While writing the payment specifics into clients budgets, I tell them to account for changes to their car insurance rate as well -- another thing many of my customers overlooked. If they care afford the insurance, car payment and any necessary maintenance with money each month to spare each month, then it's a decent buy in my book.
Get Your Ride
Keep Fixing Your Credit
As I counsel people on their budgets now (especially those with bad credit auto loans), I ask them to make a commitment to making this bad credit car loan their last.
I tell my clients to start chipping away at their disparaging debt with the money they didn't apply to a horrendous car payment. For most of them, their credit rebounds to far better levels in as little as two years. At which point, those clients can refinance their bad credit auto loan with 12 months left on the note, pay it off soon after that (by making the same higher payment they were already used to) and never have to get a bad credit car loan again.