How to buy a car with bad credit


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When you need a new car, it can sometimes feel like you needed it yesterday. Sure, there are times when our cars become predictably unreliable, and we can start to prepare for the purchase, but there are also times when an accident or a need for a repair costs more than the car itself is worth. In those instances, the last thing you need is for your credit to hold you back.

Luckily, although good credit can help you get the best possible deal on car financing, you don’t need to have good credit to get into a new (or new-to-you) vehicle. Read on to find out how you can buy a car with bad credit.

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Run a quick check on your credit report


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When’s the last time you read your credit report? Although this is a task that can seem irrelevant in your search for a new car, your credit report easily spells out anything that might be dragging down your credit score. 

What’s more, there could be errors on your report that you don’t know about — and fixing those errors could lead to a bump in your score.

All you have to do is go to and request one credit report from each of the three credit reporting bureaus (Equifax, Experian, and TransUnion). It’s important to review all three credit reports, as the details on each one can vary.

If you find an error on one or more of your credit reports, dispute it right away with the bureau(s) showing the error. Once your report is fixed, you might see a boost to your score (and that can help you get a better deal on an auto loan).

And if you want some more help on these steps, check out our resources on how to read a credit report, how to find mistakes on your credit report, and how to write a dispute letter for your credit report

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Gather your cash for a down payment

After your credit report is squared away, the next step is to gather any cash you might have to build up a down payment. The more money you have to put down, the less you’ll need to finance. And if you end up with a loan that has a high interest rate, you’ll want to borrow as little as possible.

That doesn’t mean you should gather a down payment so you can afford a higher-priced car. While that’s an option, the ideal situation is to get you into a car that doesn’t cost you more than it’s worth. And nothing can increase the cost of an item more quickly than high interest rates on a loan.

If you don’t have any savings at all, see what you can get for the car you have now. That could include selling your car for parts if it’s a beater or selling your car online if it’s in decent shape. (You could also opt for a trade-in, but you will likely get less than you would if you sold it yourself.) 

Remember, the more cash you enter into the deal with, the less debt you’ll have to go into when buying a new car.

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Find a few financing options

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That said, you’re probably going to need some financing on your new car (as many people do). But that doesn’t mean you’re stuck with whatever loan the dealership will give you. In fact, before you even step foot in a car dealership, go to your local banks and credit unions to see what kind of deals they have going on.

You might think a bank is less likely to work with you than a car dealership, but that’s not necessarily true. Start with the bank that holds your checking and/or savings accounts, as they might be willing to offer you something to keep the relationship going.

Then go to credit unions around town. These smaller banks are more relationship-based and might work with you even as a new customer. Ask to see what you can get pre-approved for at both your bank and local credit unions to see who’ll offer you the best deal.

After you know what you can get pre-approved for, then you can see if the car dealership is willing to beat it. (Keep in mind that beating the deal means offering you a lower interest rate, lower fees and not simply offering you a higher loan amount.) At the very least, this initial research prevents you from being stuck with whatever the dealership might have offered you.

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Research bad-credit car dealerships

If you had trouble getting pre-approved for any auto loans at all, then you might need to buy your car at a bad credit car dealership.

This can be tricky, as these dealerships have a reputation for selling low-quality cars at higher prices than they’re worth. That said, you might still be able to find a diamond if the rough if you’re willing to look around. 

To see what kind of reviews these car dealerships have, we did a rundown of two of them ourselves — one is a review of bad credit car dealerships in Houston, and another is a review of bad credit car dealerships in San Antonio. What we learned is that you should beware of pushy salespeople, cars that break down no sooner than you bring them home, and service centers that will have you waiting all day for a repair.

On the positive side, it seems as though customers who found a more patient salesperson and who test drove a few cars before buying had better luck. 

So, if you end up at one of these dealerships, know that you should walk away if anything seems off. It could take a few days or even weeks to find the one car at the one bad credit car dealership that’ll work for you —  but it’s a wait that could make your life easier for the next few years. 

And if anyone is talking down to you or desperately trying to activate your FOMO on a car you’re interested in, consider that to be a red flag and walk away.

Image Credit: Stephan Müller / Pexels.

Consider buying online

These days you can buy anything online, cars included. Whether you’re looking at buying a car from an individual or from a dealership, starting with an online search can make it easy to discover what kind of cars you can afford. (And if you buy from an individual, you can skip the dealership route altogether, though that could mean buying in cash rather than having the option to finance.)

Whether you buy a car online or not, know that you should never buy a car without test driving it first. Go see it in person, make sure everything is just as the seller said it would be (dealerships too), and then take it for a spin. Even just a few minutes in a car can tell you a lot about the shape it’s in.

And, if nothing else, you can use the option to research online as a way to save yourself the headache of looking at cars in person until you’ve narrowed the search down to your top choices.

Image Credit: Michal Kubalczyk / Unsplash.

Follow these guidelines before you buy

Finally, after you have the financing you need and found a few cars you’re interested in, follow these last few guidelines to make sure you don’t end up in a lemon:

  • Always test drive before you buy — preferably on local streets and a highway to see how the cars operate on both. If you can, test drive it on over to your mechanic (or at least get his or her advice on reliable makes and models).
  • Obtain a vehicle history report on any used car you might be interested in, but know that these reports can sometimes miss important details (which is just one more reason why it’s so important to test drive and inspect the car).
  • If you end up at a dealership, go through every detail on the paperwork they draw up before you sign — you might spot hidden fees or clauses that put you in a bad spot should your car break down soon after the purchase.

Buying a car is rarely easy, no matter the state of your credit. But if you take your time and follow guidelines like these, you can protect yourself against a bad deal.

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