What You Should Expect When You Want To Buy An Auto With Bad Credit

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Whether you have bad credit through bad decisions or bad luck, you can still finance a vehicle. Of course, you will need to pay substantially more for a vehicle than if you were able to obtain traditional financing.

The type of vehicle that you can purchase will depend on your ability to make timely vehicle and insurance payments, not on your credit rating, but you should carefully consider affordability in making your choice.

Making payments on time is even more important when you have bad credit, because dealers are forced to be more stringent in repossessing a vehicle for late payments.

How do you finance a vehicle at bad credit car lots?

As many bad credit dealers advertise, your job is your credit. If you can provide proof of employment, a stable work history, a down payment, and insurance, you can often drive your vehicle off the lot the same day.

You will need either a specified number of check stubs or direct deposits into your checking account, along with contact information for your employer. Some bad credit car lots also provide access to insurance, which usually also requires a down payment.

Most of these dealers offer a lease-to-own arrangement, which essentially means that if you make a specific number of payments, the vehicle is yours, but if you miss any payments, the vehicle can be repossessed and you lose any accumulated equity in the vehicle.

However, most dealers have a grace period for occasional late payments, so a vehicle won't necessarily be repossessed after a single late payment. Instead, many dealers equip their vehicles with an automatic kill switch and GPS device.

If a payment is not received by a specific day and time, the kill switch is activated and the vehicle immobilized. When the payment is made, the kill switch is deactivated. If the payment isn't made, or a bad character decides to try to abscond with the vehicle, the GPS will locate it so the dealer can retrieve it.

Factors to consider when determining what type of vehicle that you can afford

While the dealer will allow you to choose a vehicle based on your income, you are the one with the most complete knowledge of your living expenses. This means that you must consider your other expenses first, then add both car and insurance payments to your total expenditures.

Insurance may be more expensive than you anticipate if you have had insurance with a standard company in the past. This is because most standard insurance companies will not issue a policy if you haven't been insured for a period of ninety days.

This means you must obtain high risk insurance, which is often twice the price (or more) of standard insurance. This is true even you have had insurance for many years in the past and have a pristine driving record.

You can often be accepted for a standard insurance policy after one year of safe driving under a high risk policy, but that means at least one year of very high insurance payments.

Many bad credit auto loans require weekly, rather than monthly payments, to help to decrease the risk of defaults and repossessions. Weekly payments add the equivalent of an extra monthly payment for each year of the agreement, so this additional sum must be included in your proposed vehicle budget.

While it is not an ideal situation, the dealers must protect their interests and you need a vehicle. Fortunately, this option is available to keep you on the road until you can rebuild your credit. You can find out more information at a dealer near you. 

25 April 2017