Tips for Used Car Shoppers with Bad Credit at Used Car Dealers

With a few exceptions, most of us need a car to manage our day-to-day lives. Unless you live in a city with great public transportation or can skip the commute, driving is often non-negotiable for getting to work. In turn, getting to work is a requirement for paying the bills, putting food on the table, getting to the store to buy the food—you get the picture. So what’s a used car shopper with bad credit to do? Fear not. We’ve rounded up the tips you’ll need to get the best financing from used car dealers so you can get behind the wheel without paying an arm and a leg at used car dealers.

Check Your Credit Report Before You Shop

Don’t just assume you have bad credit—or that everything appearing on your report is correct. Take charge of your financial destiny by requesting a free copy of your credit report and verifying the information you see there. You may find mistakes that are driving your score down. It’s also common for the strikes against you to be reported without updates when you make payments or resolve problems that would raise your score. Check everything you see on your report against your own records, and don’t be afraid to open a dispute with the credit bureau if you find something that isn’t right.

Even if all the information on your report is accurate, you’ll be glad you’re going into the car-buying process knowing your score and knowing it reflects your history correctly. You can even bring a copy of your report with you to used car dealers when you shop to get an idea of what financing options they can offer you. Check a report from each of the three credit bureaus: Experian, Transunion, and Equifax. To be safe, use the official, federally authorized website annualcreditreport.com. You’re entitled to a free copy from each bureau once per year.

Avoid Predatory Lenders

Lots of us are in the bad-credit boat. There’s a reason you’ve regularly heard an announcer squawk, “No credit? Bad credit? No problem!” over the radio or TV set. As with any common challenge, plenty of scammers or unethical used car dealers exist to take advantage of people who face bad credit. Watch out for these red flags.

If a used car dealer or sales representative wants to match you with a “bad credit specialist,” say no thank you, and walk out the door. While you’ll probably have to pay higher interest than shoppers with better credit, you don’t need a specialist like these. They tend to make their living on repossessions, which means it’s in their best interest to put you in a payment arrangement you likely won’t be able to fulfill. Read reviews for your used car dealers.

Extras Aren’t Essential

When you’re shopping for a car with less-than-average credit, you may encounter used car dealers who want to stuff your contract full of extras. Some salespeople may even tell you: you can’t be approved for a loan unless you agree to certain options, such as extended warranty plans, service or maintenance agreements, insurance, and the like. If this happens, it’s a major red flag. Don’t agree to any financing plan that hinges on your purchase of anything but the used car you want to buy.

Amp Up Your Down Payment to Save Interest

The more you can put down on a car; the more your used car dealer can save you in interest. Put simply, that’s because you won’t pay interest on the chunk of change you initially put down. Of course, when you need a car, you probably need one fast, but it may be worth waiting just a while to save toward a larger down payment. Can you carpool, take public transportation, or use a ride-sharing service, such as Uber or Lyft, for a month or two? Your future self will thank you.

Use the Buddy System

When you can, partner up. One way to do this is finding a cosigner with good credit for your loan. Having a cosigner whose credit is better than yours can drastically improve the interest rate you’ll qualify for. Be aware, though, that your cosigner is equally responsible for paying off your vehicle. Repay their trust in you by paying on time, so they don’t have to pick up the slack.

Another way to use the buddy system is simply bringing a friend with you when you shop. An extra set of eyes and ears is helpful no matter what the decision is you’re trying to make. You can even ask your friend to play the “bad cop” and respond to salespeople with a little extra skepticism or ask frequent questions. It never hurts to have someone else looking out for what’s best for you.

Don’t Just Read the Fine Print—Understand It

Before you sign on the dotted line, make sure you know exactly what you’ve signed up for. If there’s any part of the contract’s language you don’t understand—which is common with legalese—make it your business to understand it completely. You’ll be the one responsible for upholding the terms of your loan, so be your own advocate. And don’t take a used car dealer’s word for it—do your own research about phrases or sections you’re not sure of. There’s plenty of information online to help guide you through this process. The web is full of calculators and tools to help you turn interest rates and loan terms into concrete numbers so you can see exactly what you’re paying and when.

Look at the Big Picture

While you’ll want to be aware, of course, of what a payment plan will mean for your monthly budget, that monthly payment amount isn’t the most important part. Shop and negotiate with the total purchase price in mind instead. This strategy will help you avoid falling into the trap of an affordable monthly payment that stretches on for years and years, adding up to more than you meant to spend. Have a figure in mind for your used car budget, and be honest with your dealership about that number. Then as the conversation progresses, shoot for the lowest APR you can get, with payment terms across the shortest possible duration, so you get the best deal.

Shopper, Know Thyself

One final note: Optimism is a great quality. However, don’t go into a financing agreement for your used car with rose-colored glasses on. Be honest with yourself and your used car dealer about your credit history and your future ability to make payments. After all, no one plans for emergencies, but they happen to the best of us. It’s much better to settle for a slightly cheaper vehicle you know you can pay for each month than to stretch your budget just for a nicer ride. Take advantage of this opportunity to build positive credit history by shopping smart and being realistic about what you can afford. Every payment you make on time, when reported to the credit bureaus, will take your score higher.