How to wisely purchase a new car with bad credit

Michael James

Buying a new car with bad credit isn't ideal but it's possible.


Making a major purchase with bad credit is difficult, but trying to buy a car with bad credit or post-bankruptcy is more difficult. However, it’s impossible and there are conditions.

When you get a car loan with bad credit, the interest rate will likely be high. Make sure you have enough cash each month to make payments. If you fail to meet the terms of the loan, your credit score will take another significant dip, your new vehicle will be repossessed, and you’ll be out the thousands of dollars you already spent on the vehicle.

Buying a new car with bad credit isn't ideal but it's possible.
Buying a new car with bad credit isn’t ideal but it’s possible.

But don’t be discouraged. You can make a sound purchase, improve your creditworthiness and still driving away in a brand-new vehicle. But how can a currently non-creditworthy individual, get approved for a car loan after bankruptcy or with bad credit? This post explains how.

According to Fox Business, the average interest rate for new car loan for people with bad credit is just below 13 percent. The average interest rate for a car loan on a used car and for people with bad credit is just below 18 percent. That kind of interest rate would make anybody want to put the brakes on buying a new car.

Your interest rates are bound to be high no matter what, but the more money you have to put down up front, the more responsible you appear, and creditors love responsible individuals. Not only will a good portion of the total loan make you look good, but it will also reduce the amount you owe, which makes you less of a risk. The less of a risk you are, the less compelled lenders will feel to charge you sky high interest rates.

Too many people assume they have bad credit and so go to the first dealership they see with signs that advertise “Bad Credit Car Loans!” First, going to the dealership without knowing your score makes it easy for the dealer to rob you blind in interest. Second, even setting foot in a place that advertises bad credit loans is a sign of desperation. When you know your score, you can preserve your integrity and be in a position of negotiation.

Your score is probably not as bad as you think it is, especially if it’s been months since you’ve started taking measures to improve it. Run a FICO check as soon as you make the decision to start shopping. If your score really is as bad as you imagined, you may want to hold off on buying a new car until your score has improved. If it’s not as bad as you thought, hold this knowledge near and dear to your heart, and when the dealer tries to convince that your score is worse than it is, let him or her know that you’ll be shopping elsewhere. That should be enough to convince him or her to change his or her tune.

If the car buying process takes you a couple of hours, you’re doing it wrong. Even people with good credit spend entire weekends searching around for the best deals (which may be why they have good credit in the first place). Follow their lead and go from dealership to dealership see if they offer loans for people with bad credit and, if so, what type of rates you can expect. Don’t let any dealer run a credit check unless you think you’ve found the car that you want. Having your credit score run over and over again can really hurt your credit, making it even more difficult for you to get a loan with good terms and rates.

Even if you’re not really interested in buying a new vehicle, doing so may be the best thing you can do for your credit score. According to, individuals with subprime credit scores saw a 52-point increase over the term of their three-year loan, compared to the 32-point increase of those who chose not to take out an auto loan. That said, if you have the cash, it couldn’t hurt to invest in a new set of wheels. Just keep the above tips in mind to ensure the best loan and the best rates when you do make the leap.

Article Last Updated: December 17, 2018.

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