If you find yourself in the position of buying a car with bad credit, then there are some very important do’s and don’ts that you’ve got to keep in mind.
First… don’t ever let the dealer or salesperson put you in any car until you have completed all the financing paper work and the terms of your bad credit car loan are approved and locked down tight.
Keep your old car, take a bus, ride your bike… whatever… just don’t take the car you are looking at home until the deal is done… and I don’t mean the sales person telling you it’s a done deal. Buying a car with bad credit should raise buyer beware flags for you because you can be a huge profit center for a sales person and dealer.
Letting you drive off the lot with your car when your car financing hasn’t been approved is called a “spot delivery”. Dealers engage in this all the time, because they want the sale and they want you to fall in love with your new car. Although a common practice by car dealers, it isn’t the best thing for you to do if your buying a car with bad credit.
If you drive off the dealer lot thinking all is well, it might not be. You may get a call telling you that the dealer couldn’t quite get you approved and if you want to keep the car that you thought was yours, you’ll have to either pony up a bigger down payment… which you probably can’t… or you’ll have to sign off on a much higher interest rate… chaa-ching for the dealer… so don’t fall for this… especially if you’re buying your car with bad credit.
Bad credit car buying customers represent a bit more paperwork for the car dealer and car salesperson, but they also can represent windfall profits and sales commissions if the buyer is unsuspecting.
This is why it is critical for you to not only know your credit rating but also know what you qualify for and what your interest rate will be even with your bad credit. When you’ve got credit problems, salespeople will routinely try to push your interest rate up telling you that is the best they can get for someone with such a credit history; when in reality they are trying to maximize their profit by adding points your car loan which is profit for them. And when buying a car with bad credit, the more desperate you seem, the more points they may try to add to your car loan.
So… know the market and don’t accept auto financing without knowing what the interest rate is. period.
When you’re buying a car with bad credit, you’ve got to skip the extra’s that the dealer will try to sell to you. Again, these add-on’s represent nothing more than big profit for the dealer and commission for the sales person… so take a pass on these. The car dealer’s finance manager will work the angle that these extras will only cost you another $5-$10 per month… but don’t take the bait… since you are already paying a higher interest rate with your bad credit, these ‘little’ extras can mean thousands over the life of your loan.
Make sure your payments are going to be applied to the loan. Many people face the problem of interest rates that are pre-calculated which means you payments may just be going to the payment of the monthly interest while very little is being applied to the loan itself.
When buying a car with bad credit, the key is to get all the information you can upfront and before you go to the dealer. Get your credit report and shop your loan on-line in order to gain insight into what the market is for someone in your position.
Buying a car with bad credit doesn’t mean you have to be at the mercy of every shady deal out there…. but you do have to be aware.
