How to get a car loan when you’re credit is a problem

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Most dealerships don’t accept credit cards, but some do. So if you’re thinking of buying a car, it’s a good idea to brush up on your payment options.

Buying a Car With a Credit Card( Do’s \u0026 Don’ts )
Buying a Car With a Credit Card( Do’s \u0026 Don’ts )

Key Takeaways

1. Poor credit can make getting a car loan more difficult.

2. You can improve your credit before applying for a car loan.

3. You can increase your chances of finding a lender to approve you for a car loan if you have at least $2,500 to $3,000 in a bank account for a security deposit as well as a good ratio of debt to income.

Why do car dealerships want cash?

Car dealerships don’t really want your cold, hard cash. It’s much simpler for them if you can provide financing.

When you finance a car, a bank or credit union gives you the money you need to buy the car. They collect payments from you each month until you have paid off all of the money. Car dealerships like this process because it gets them several thousand dollars all at once.

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However, most people don’t have that much cash sitting around, and they don’t want to wait several months for the car payment. Therefore, car dealers often prefer to work with lenders.

Credit unions and banks offer consumers loans with lower interest rates than car dealers. Plus, you have much more flexibility in choosing your loan terms. When you’re getting a loan from a dealer, you’re locked into whatever they decide on.

If you’re thinking about getting a loan from a car dealership, be sure to do your research first. Don’t just pick out the first dealer you talk to. Instead, visit several different dealerships before you make a decision.

Why is car buying different from credit card purchases?

A major part of the purchase process is the sticker price, also known as the list price. This amount of money is only an estimate, and the actual final cost depends on your financing options. The sticker price includes the list price of the vehicle, any manufacturer rebates, and any taxes that are required.

A down payment is the amount of money that you pay up front when purchasing a vehicle. This includes the down payment, any trade-in value, and any lease-related fees. Keep in mind that the down payment is usually different than the amount that is due in full.

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Once your loan has been finalized, you’ll have to pay off the loan. This amount depends on the purchase options that are selected, the amount that is due, and the length of the loan.

All of this can affect the final cost of a vehicle, so it’s best to talk to your lender before you make your final selections.

How do car dealers make money?

Buying a new car can be very exciting, but unfortunately, it can also be very expensive. Many people think that car dealers are somehow scamming people, but in reality, most car dealers actually make a profit.

Most car dealerships do not operate like traditional retail stores. In fact, they don’t even purchase their cars from automakers. Instead, they typically work with an auto financing company.

When someone wants to buy a new car, the dealership will usually contact them and offer them a financing plan. The dealer will pay the auto lender for the car, and they’ll get the customer to pay for it over time.

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Dealerships don’t charge their customers for the cars they buy. Instead, they get their money from the auto finance company. This means they get to make money on the interest they charge their customers.

How do car dealers protect themselves?

Many dealers in California actually require an additional deposit for the loan. This extra deposit can be one of the largest hurdles for consumers in search of a car financing dealership.

Often, consumers will be unaware of this until it is too late. Consumers with low credit or limited income may find themselves unable to secure financing at all.

How to get a car loan when you’re credit is a problem

Most dealerships take credit cards as a form of payment, but it depends on the dealership. Some only take cash and some only take bank debit cards. It is best to call ahead to see what forms of payment are accepted at the dealership of your choice.

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