Buying a Car with Bad Credit and No Money Down

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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, and no credit check dealers.

Table Of Contents

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. Affordable monthly payments are the key factor in any approval.

Start an auto loan request here. (Sponsored Link) Picking a low-priced vehicle is the remaining factor in your control and can help overcome your two qualifying drawbacks.

  1. A negative history on your consumer report leads to higher interest rates.
    1. After bankruptcy discharge (chapter 7 or chapter 13)
    2. After a voluntary repossession
  2. A zero down payment means that you finance a larger amount
    1. 100% loan to value ratio (LTV) means higher interest rates
    2. Bigger principal amounts mean larger (less affordable) installments

Repairing your existing car is often the most realistic option as the principal amount is much smaller. Even new cars need maintenance at some point.

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

No Cosigner

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.

  1. 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.
  2. 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

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 actual 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 of 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 approval – but does not guarantee it.

Keep an eye open for takeovers and the amount due at signing.

Lease Takeovers

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 (DHPH) car lots exemplify dealerships that cater directly to bad credit drivers. A DHPH lot is a viable last resort for people with a negative history that includes an earlier bankruptcy, repossession, and other derogatory marks on their consumer report.

DHPH dealers often buy low-end vehicles at auction, 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

Low Down Payment

A local buy here pay here car lot asking for a low down payment such as $500 is more likely to result in a satisfying outcome for drivers with bad credit. Even a relatively small amount of money down can make a big difference in your risk profile and borrowing terms.

  • Low deposits show that you have some “skin in the game”
  • Even a tiny upfront sum shows the ability to handle future payments
  • The small amount covers at least a portion of the wholesale vehicle cost

Some DHPH lots may even accept a trade-in for your low-value high-mileage clunker.

No Money Down

A nearby buy here pay here used car dealer promoting zero down for bad credit borrowers is more likely to surface the possible dangers of this financing alternative. People who are living check-to-check without any resources on reserve are often behind on payments already.

Therefore, buying a car through a DHPH dealer without making a down payment is more likely to trigger one or more of these common downsides.

  • Higher interest rates needed to overcome defaults that are more likely
  • Stricter late fee policies without grace period leniency
  • More aggressive repossession policies
  • 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 those 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