How can you buy a car when you have bad credit and no money for a down payment?
It will not be easy. Improving a poor credit score helps over the long-term. But what if you need reliable transportation right away?
You need to find a company or dealer willing to finance the purchase or use of an automobile. In general, that means keeping your monthly installment amount as low as possible for the shortest period.
Drivers have four places to turn.
- Subprime online loan companies
- Leasing instead of purchasing
- Buy here pay here lots
- No credit check dealers
Bad Credit No Money Down Auto Financing
Bad credit no money down auto financing can help drivers buy now and pay later in larger installments. Both factors push up the amount you must pay each month.
- A negative history on your consumer report leads to higher interest rates.
- After bankruptcy discharge (chapter 7 or chapter 13)
- After a voluntary repossession
- A zero down payment means that you finance a larger amount
- 100% loan to value ratio (LTV) means higher interest rates
- Bigger principal amounts mean larger (less affordable) installments
Repairing your existing car is often the most realistic option as the amount is much smaller. Affordable monthly payments are the key factor in any approval. Choosing a low-priced vehicle is the remaining factor in your control aside from choosing between a loan and a lease if you decide to purchase.
No Down Payment Loans
No down payment auto loans for bad credit require drivers to work out an affordable monthly outlay amount. They can allow people to buy now and pay later in monthly installments that fit their budget.
Some lenders will look at more than just your credit report. This means you must overcome your poor FICO score by performing well on several alternative factors in order to qualify.
- Be able to verify employment and demonstrate stability by sticking with the same employer for an extended period – do not job hop
- Keep a low debt-to-income ratio by purchasing a cheaper car so that the monthly installment consumes a small portion of your monthly income
- Live at one address for an extended period to show stability in a second area and avoid alerting lenders that you may skip town if delinquent
- Maintain a checking account with a national bank and give the lender permission to automatically draft money every month
Getting approved for an auto loan with bad credit and no down payment without a cosigner is much more difficult. Having a co-signer can improve your qualifications in two out of the three key underwriting factors.
- Another person with better ratings cannot balance out your application. Without a cosigner, the lender will be less willing to approve your application. The application lacks a responsible person to step in should you encounter further financial difficulties.
- A second person cannot add his or her income and employment history to the equation. Without a cosigner, your application lacks a backup source of earnings to stay current on the obligation.
Guaranteed approval for auto loans for bad credit drivers with no down payment is not realistic. Be wary of any company promising that they will lend you money regardless of your age, income, employment history, and other monthly obligations.
No legitimate finance company can legally make an ironclad pledge to approve everyone. This claim is misleading. The online resources making this promise are not direct lenders. They operate affiliate programs (as does this site) and receive compensation for referring consumers whom the lender ultimately approves.
No Down Payment Leases
Leasing a car with bad credit and no money down is often easier because you are paying to use – not buy – the vehicle. All auto leases contain mileage limits, which place restrictions on the amount of driving and impose overage penalties to enforce the upper bound.
This means you are financing a smaller portion the cost. This leads to smaller monthly installments that are more affordable even though the cap cost reduction amount is zero. This improves your chances of an approval – but does not guarantee it.
- An underwater or upside down trade in does not help
- Most companies still consider your FICO or Vantage score
Keep an eye open for takeovers and the amount due at signing.
Lease takeovers do not have a down payment requirement. The person transferring the contract already did this. The new individual just has to assume the remaining monthly installments on the vehicle.
Bad credit drivers are more likely to qualify for a lease takeover because the remaining contract term is much shorter. Less money is at risk. The original driver already satisfied many of the requirements.
Takeovers allow you to use a reliable car for a short period. Take advantage of this opportunity to pay on time every month and improve your consumer report and score.
Amount Due at Signing
Do not overlook the amount due at auto lease signing (inception amount or drive out cost). You still must fund cash upfront before taking possession of the vehicle – even if you negotiated a zero down payment.
- Security deposit equal to one monthly installment
- Sales taxes
- Dealer preparation fees
Car Dealerships Bad Credit No Money Down
Finding a bad credit no money down car dealership near you often means cutting out the third party finance company or bank and accepting that you will pay more and have fewer choices. However, at least you can obtain reliable transportation in order to get to work.
Using a personal loan for a down payment can improve qualifications. As always, finding an affordable and reliable vehicle is the key to success. Therefore, a motorcycle or inexpensive used auto works out better than a pricier truck, jeep, or RV.
Buy Here Pay Here
Buy here pay here car lots exemplify dealerships that cater directly to bad credit borrowers with no money to make a down payment. These used auto dealers often buy low-end vehicles, fix them up, and sell them with high margins to consumers with few other options.
- Buy here implies that you can choose only from vehicles on one lot
- Pay here indicates that the local dealer processes the reimbursements directly
Buy here pay here dealers control the end-to-end process. This eliminates some of the guesswork associated with third-party finance companies and banks. It also enables them to bundle the pricing package together and charge higher prices overall.
This is what to expect from local buy here pay here auto sales dealers.
- Weekly or bi-weekly installments that match your employer payroll cycle
- They may not accept a traditional bank check
- Physically deliver cash
- Money orders
- Pay by phone
- Automatic draft from checking
- Stricter late fee policies
- Bigger fees
- Faster repossession
- May not report the positive behavior to consumer agencies
No Credit Check
Car dealerships with no credit check and no down payment cater to drivers with poor FICO scores as well as though yet to establish a history. Expect to pay more in interest to finance an auto if you have a negative history or you are a first time borrower.
No credit check means that the dealer does not pull a copy of your traditional consumer report from Experian, Equifax, or TransUnion or consider your FICO and Vantage score. However, it does not mean that they approve every applicant.
The dealer may pull a non-traditional report that considers utility and rental payment information as well as other supplemental sources of data. In addition to affordability, they will impose other criteria as well.
- Be at least 18 years old
- Be a U.S. citizen or permanent resident
- Earn a steady monthly income of at least $1,000 after taxes
- Have a checking account in your name
- Be able to provide work and home phone numbers, as well as a valid email address