Sometimes, life comes at you fast and you find yourself in the yellow or red in terms of your credit score. This can be a pretty hefty blow if you’re currently in need of a new vehicle. Though your shopping choices may be limited compared to someone with good credit and you may need to put forth a little more effort into the same kind of deals, you might also be surprised by how much room you have to work with. Keep reading to view some of the things you should keep in mind when shopping for a new car with bad credit.
Know What The Red Flags Are
As in, know what red flags your car dealership will be looking for. Auto lenders are going to be keeping an eye out for a number of ‘red flag’ items when working with any potential customer, and these flags could net you a higher interest rate, or even ruin the sale altogether. They include a history of debt collections, bankruptcy, charge-offs, late rent payment, tax liens, or lawsuit judgments. If any of these things show up in your recent history, you might want to wait to jump into the market if at all possible.
Do Your Research
Unfortunately, there’s an entire industry built around scamming drivers like you who are suffering from bad credit. Companies out there will promise you good rates even if your credit score isn’t the best, and while many are legitimate, there are many more that are just trying to find ways to part you from your money. Make sure you read all of the fine print before signing any contracts or purchasing any vehicles. Have a good understanding of how your interest will work and be sure that there won’t be any hidden surprises popping up later down the line.
If you find purchasing a car to be outside of your realistic capabilities right now but still need a vehicle immediately, consider leasing a car instead. This option will allow for potentially low down payments, lower monthly payments, and less maintenance hassle. Not only that, but you can work on improving your credit score by paying off your car leasing payments in a timely fashion. As you build your credit back up, you’ll still have a vehicle to work with, so you can get two things done at the same time.
Be Prepared To Compromise
When we go car shopping, most of us look for at least a few ‘extra’ features that aren’t considered necessary for a vehicle. This might be heated seats, a leather interior, or an improved sound system. Whatever your preferred additional features are, though, you might need to consider letting them go for the time being. Extra features that don’t contribute to the performance and overall safety of the car will usually tack extra money onto your costs. Keep in mind that your interest rates will be higher than most other drivers; this is probably where most of your money will go. Decide what extra features you can live without and be brutally honest with yourself about it. Then, narrow down your options from there.
Check The Interest Rates
When you’re looking into buying a new car with bad credit, you’re going to want to research, research, research everything there is to know about the interest rates. Understand what the current interest rates are for someone with your credit score before you even think about buying a vehicle. While you can expect to pay more than someone with good credit, you shouldn’t be looking at figures that are double the average, or higher. Unfortunately, as mentioned above, some people are waiting to take advantage of those who are struggling financially and may be feeling desperate to be approved for a vehicle.
Know Your Spending Limits
One of the most important things to keep in mind: don’t overestimate your car budget. Set a strong budget before you start shopping and stick with it. Know what you can afford. Even if you may want to overestimate your budget to get a perceived better car, and even if you’re approved for loans with bigger payments than you expected, always stick to what you’ve budgeted beforehand. This will keep you from getting into stressful situations with your other bills, which will in turn, help you continue to make your bill payments on time and improve your credit standing.