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How to Buy a Car with Bad Credit without It Turning into a Nightmare (A Step-By-Step Tutorial)

Are you tired of hearing the word 'No' when it comes to a car loan? I set up auto bad credit financing loan specifically so that you could hear the words 'yes'. Who am I, you ask?.

I spent 14 years as a Financial Manager in the car industry, so I think it's safe to say that I know a thing or two about having a loan approved, regardless of the credit background. 

Remember, you do need a car, want a car, and most importantly, you deserve a car, regardless of your credit history. You can also be handled with dignity and provided with options. I'll show you how to have an option when it comes to car poor credit ding loans. 

I know what you're thinking: this woman has gone insane! However, I have some insider information about Ford Motor Credit and a few other well-known lenders that may be of assistance to you. To begin with, all lenders now buy offers using a beacon ranking, which is the same as your credit score. Three credit bureaus are included in the kit. When reviewing the credit, each lender will use whatever credit bureau(s) they choose, or a mixture of bureaus. 

When testing your credit, I strongly suggest you to pull all three credit bureaus and pay for your credit score.

You can only see half of the scene if you only look at one bureau. Bad credit lending is an art form that requires ability. 

With a few exceptions, if your credit score is about 600 or higher, Ford Motor Company can look at your contract with the goal of buying it. The following are the details: 

  •  You must not have had a prior repossession with Ford Motor Company.
  • Whether you've had a repossession, that would have  been a year or more ago; if you've had two repossessions, ignore it and go on to another lender.
  • You can apply for a Ford Motor loan if you have just been released from bankruptcy and have a high enough beacon ranking.

Since the debt has been dissolved, you cannot get any unfavorable credit. Except for these three factors, beacon score would play a significant role in your acceptance. Being rational is one thing, but staying within the financial limits is another. If you make $2500 a month and have $1200 in the bank, don't come in all haughty and tell the Finance Manager that an Expedition or nothing is your only choice. You're going to end up with zero. 

You'll need to know what your credit looks like and what your credit score is in order to use auto poor credit lending effectively. Otherwise, you're stumbling around in the dark. 

If you don't pay for your credit score, it would be almost worthless. You'll know if you apply for a loan like Ford based on your credit score. In addition, the lower the interest rate, the higher the credit score. Is that clear? The higher the beacon score on an auto poor credit loan, the better.

Allow me to describe websites such as and others: They collect car loan applications online. They then have a network of dealerships that pay them for the leads they provide. There are typically dealerships with offices dedicated to getting you funded regardless of your credit situation. Since these agencies pay for these leads, they take them very seriously. They are, in a sense, their bread and butter. 

This could be the only option if you have a lower-than-average credit score, a recent repossession, or just plain poor credit. If your credit is truly awful, keep in mind that you'll need cash or a paid-for trade-in that's genuinely worth something. 

Okay, here's the step-by-step method I promised. First and foremost, take command of your car purchase! If at all practicable, you should be in the driver's seat. Run a replica of a tri-merge, which includes all three credit bureaus, as well as pay for your credit report, online. Once a year, you can get a free copy of your credit score HERE:

This is a recent Federal statute that entitles you to a FREE copy of your credit bureau once a year, subject to some exceptions. This isn't a service that keeps track of your credit. Experian, Equifax, and TransUnion are the three bureaus you would manage separately. After that, you would pay for your credit score. 

To avoid some misunderstanding, here's the scoop: Each credit bureau's credit score would be different. That is why a Tri-Merge is referred to as such. You should run a Tri-Merge with one business (there are many-do a Google search) to have one bureau (it's basically all three combined, but the credit score is just one credit score). It's more costly, costing about $34.00 on average, so it's all up to you.

Examine your credit with your credit report and a copy(s) of your credit bureau in hand. Is there something odd on there that isn't yours? If that's the case, it's time to take action. Every 6 months to a year, you can check your credit bureau.

Furthermore, you can be notified quickly if your identity has been compromised. P.S. You should even put a liner on the bottom of your bureau that says, "Do not lend any credit on my behalf without first calling me." At number (111)222-3333, home number (222)333-4444, cell number (333)444-5555.” Request that this be accomplished by calling or writing the credit bureaus. This can now be done for free online. Do a Google search for any of the three bureaus listed above.

You can wonder how to repair your credit. For the asking, I give away a completely free book that I wrote on the matter. Email me with the subject line "Free Credit Repair Book" and I'll send it to you. Next in line: Before you go shopping, make a list of what you want to buy. Let me be really straightforward about everything. 

The role of a car dealer is to sell you a car on your first visit. A salesperson and their sales manager assume that if you step into their dealership and leave without purchasing a vehicle, you will never return. They will beat on you before either A) you become enraged and resign, or B) they sell you a car. It's part of the beast's essence. Accept it in advance.

What do you want to buy? Where do you get impartial auto information? Again, Google Kelley Blue Book or NADA to get rate, warranty fixes, recalls, and information on issues, as well as a wealth of other information. Limit yourself to three styles while shopping. Maintain a straightforward approach. Those are the ones you'll be looking for.

Can you afford the car? You may believe you can afford the car, but the bank may have a different opinion! This is something I've seen many times in my career. Economics of Automobiles in a Nutshell: Take your gross income (what you get every year BEFORE Uncle Sam taxes you) to make sure it's provable (tax refunds, search stubs for taxes deducted, or a W-2). You'll need two years of tax returns with Schedule Cs if you're self-employed. This is the amount of money you paid taxes on. It's difficult to be self-employed. If you are self-employed, you can need to balance your salary with that of your partner.

Find out what all of your monthly loans are now that you have your gross profits worked out. All should be included... It's on the credit bureau's list. Example: Car note=$450.00 + House note= $560.00 + Credit card debt= $425.00Boat note= $310.00  Charge-offs=$1200.00 (yes, charge-offs; these are bills that you never paid and they were written off). 

Add all of your debts up. With just your obvious debts (including the charge-offs), you have $1805.00 per month going out. I arrived at that figure by adding up all the monthly notes and taking 5% of the charge-offs. 5% of $1200.00 = $60.00. But we're not done yet. Now we must factor in the cost of housing and electricity. For services, each lender has their own formula, so a fair range to estimate is $300.00. We've already spent a total of $2105.00. This is what you'll use to pay off  your existing debts before taking on the new ones.

Almost all lenders won't let you borrow more than 20% of your current income for a new vehicle. Let's say your monthly gross income is $5300.00 for our case. Let’s take $5300.00 and subtract your debts, which are $2105.00. That leaves you with $3195.00. To make it easy, take $2105.00 and double it. That would be $4210.00. This will leave you with $1090.00 in net income. The debt-to-income ratio is what the investor is looking for here. They're curious if you're going out more than you can take. This is purely a case of statistics and numbers that can be proven. If your total monthly revenue was $4500.00 and your monthly loans is $2105.00, you'll need to do one of two things: apply your partner's income and your spouse to the contract, or swap off the other vehicle. You'll have a rough time securing a loan for something if the debt-to-income ratio is close to 50 percent. Does that make sense? The bank sees it this way: you can't afford both vehicles, so they think you'll give the other (older) one back to the lender for repossession. That is their point of view. The debt-to-income ratio is extremely important.

Under this scenario, the remaining disposable income is $1090.00. That would be $1060.00 if you took 20% of it. Oh my goodness! Let me be the first to tell you that you will not be receiving a $1060.00 car loan! What is the reason for this? 

For starters, you just have $1090.00 left over. Let's be honest about this. Most lenders would halve it, bringing the total to $530.00. Your payment call should be in the neighborhood of that amount, plus or minus a few bucks.

What kind of car can I afford with a $530.00 down payment? Good query, and one that you simply must know in order to choose the appropriate vehicle. One response is that it depends on the loan's name. As an example, you can fund for 36, 48, 60, or 72 months. That's 3 years, 4 years, 5 years, and 6 years, respectively. I'll tell you something: the worst thing you can do is stretch the note for as long as possible in order to get the payout you can afford. This results in a condition known as "Upside Down," which impacts more than 75% of car owners. It means you owe more money on your vehicle than it is worth. When you try to cash it back, it also means you'll need more money down. The only way around this is to put down a large sum of money or take out a short-term loan.

You should look for a car loan calculator on Google once more. You'll enter the loan number, word (48, 60, etc. ), and interest rate. If you haven't already been accepted and know the rate, you'll have to guess.

Here's a rule of thumb for you: 

  • it's not an absolute science without understanding your credit score, so it's a good starting point. Let's base the rate on 
  • your beacon score, which is what most lenders would consider. If your beacon (credit score) is 400 or lower, you should 
  • budget for a 21 percent interest rate on a new car (state maximums vary, so it could be 18 percent). If you are looking at a 
  • used car, figure on 33%. If your beacon ranking is in the low 500s, calculate your current car loan as if you had a 400 

beacon score. If your beacon value is in the mid to high 500s, a new vehicle will cost you 18% and a used car will cost you 27%. If your signal is between 600 and 649, a new vehicle would cost 16 percent and a used car would cost 20 percent. If your beacon score is between 650 and 699, you should expect a new car rate of 12 percent and a used car rate of 16 percent. I may be exaggerating on a couple of these, but I live in the state with the highest rates in the nation. It's better to be safe  than sorry.

BEFORE you start shopping, get pre-approved. In certain ways, this is the easiest element. Remember how I said at the start of this article that you should take control of your car purchase rather than allowing the dealer to lead you by the hand? It all comes down to money.

You are in command if you can step in with a search in your bag. I'll suggest a few firms that are trustworthy, have a track record in subprime lending, and will all give you a search at your house. Then you go into a dealership and pick your car, bargain, and purchase as if you were a cash buyer! Household Finance, Capital One Finance, Americredit, and E-Loan are the firms in question. You can find all four with a Google search, submit online, and receive an immediate or very fast acceptance. They send you the contract and then the check until you've been accepted. It's that easy.

Here's when the final decision for the car-work smart comes into play. Nothing is more expensive than time, and nothing is more satisfying than having peace of mind. And don't sprint from one dealership to the next. That's incorrect. Choose the three car types that you can afford. If you're searching for a program car (rental), contact dealerships to see if they have any available. If you choose a new car, ask those people who own the brand where they got theirs and if they can buy from them again. Pass on if you witness a lot of "I'll never buy from them again." Something isn't right. Your new vehicle is just as valuable as the after-sale service you can get.

Most people despise negotiating. In 14 years, I've only met two people who loved it; all were elderly and had nothing else to do. One did it just for the sake of it, never buying even though you agreed to his price. Don't squander the attention of anyone. If you don't like the car, don't try to get a better deal. When you see a car you want to purchase, tell the salesperson you'll buy it right away if the price is right and they give you a Car Fax. If the price is right, that is the main phrase here. How can you determine what a reasonable price is? I'm pleased you inquired. Kelley Blue Book would have dealer expense if it's a new vehicle.

Visit for more information.

If it’s a used car, compare used car figures at and What’s the difference? Most dealers (with the exception of the West coast) will use NADA as their guide. 

You went to the dealership on a Sunday where there were no salespeople and got the Vin# of the car, as well as the tools, year model, and took a closer look at it. You already know whether or not you will buy a car after driving it. To top it off, the list price is in the pre-approved check category. You've also looked up the car's wholesale, trade-in, and retail prices on the internet. 

The dealer should inquire for the car's retail value. This will help you determine if the salesman or the dealership is attempting to increase the price of the vehicle. The trade-in value is a calculation used to estimate how much the dealership paid for the vehicle. It would show you how much the dealer pays for the vehicle before reconditioning costs and any service tickets.

Not every model of car now has a trade-in value. A Honda and a Toyota are two of the vehicles that will be available at this time. Those automobiles would be valuable as trade-ins. Domestic vehicles, with the exception of modern, hot ones, rarely have trade-in value. Other versions can only sell in bulk. Kia, for example, makes a decent car, but most people won't be able to get close to trade-in prices. Mitsubishi is undergoing reforms and will not be able to match trade-in value. There are a couple of exceptions to this rule: Katrina and Rita were two hurricanes that resulted in a scarcity of used vehicles. 

That would be the case for a while if you live in the south. With the case of Honda and Toyota, you will typically sell less than the trade-in value. It's not thousands, mind you, so it's a lot fewer. Take into account the additional expenses of trading in a vehicle. Also, inquire as to how long the salesperson has owned the vehicle. If the salesperson makes a mistake and says they've had it for a bit, you'll have an easy time bargaining. The explanation for this is that the dealer is paying interest on the vehicle on each month it remains unsold. The book's worth is now decreasing month by month, so it must be sold.

Make sure they remember you're paying cash in the vehicle purchase. Don't say anything about doing a check from Americredit or whomever. It's none of their concern. Before you sign some documents, demand that the Used Car Manager run a Car Fax on the vehicle. A Car Fax report will reveal whether the vehicle has been in a major accident, was purchased back from the original owner, or has been salvaged. This would make you feel more at ease. Don't buy the car if you don't want the Car Fax.

I can't emphasize this enough: don't fill out credit applications at each dealership while you're shopping. The dealer pulls your credit report every time you sign a credit application, and your beacon score drops. That is why I recommend obtaining approval ahead of time. Having authorised ahead of time has a lot of benefits. The biggest benefit is that you, not the dealership, are in charge. That alone is worth a fortune. It is their duty to seize hold over you right at the start of each meeting. Believe me when I say that I know what I'm talking about. That was my life for a long time.

Don't worry if you can't get pre-approved because your credit is terrible (a discharged bankruptcy, by the way, is an instant-approval), and you have to go through an internet clearinghouse like Continue to discuss and insist on a Car Fax report through following my previous moves and advice.

When you finally settle on a car and head into the Finance Office to sign the paperwork, I want to make sure that everybody knows that you do not have to buy anything to get the loan. When someone in Finance advises you that you need to buy a guarantee and a credit life in order to get a loan, they are lying. Why would a Finance Director do such a thing? And they, too, are paid on commission. Are you surprised? Don't be that way. When dealers discovered how much money they could make, they set up Finance Offices in this manner. The Finance Manager is compensated for the premium they quote you, the warranty they offer you, the gap cover you purchase, and the credit life and disability insurance you purchase. 

But it's not to suggest that all of these brands aren't healthy. Extended warranties are everything I believe in. I'm simply advising you to do some preliminary research. If you find a low-cost warranty, research the provider and make sure they can automatically send the dealer a credit card over the phone if you need maintenance in either state. Overall, I believe a manufacturer's warranty is still preferable to an aftermarket warranty. Continually. If you just like it, you can just haggle over it. The only time you wouldn't like gap insurance is if you paid cash for your car. Otherwise, gap is inexpensive (approximately $495) and would cover the remainder of the cost the insurers won't cover if the car is totaled. JRemember what I said about a book being dropped on a car once a month?

Unless you set down a large sum of money at the time of buying, it will never be worth what you owe.

Credit life and disability insurance are very confidential. When you have life insurance, which will be used to pay off the car loan if you pass away. Why do you need Credit Life if you're single? The main advantage is that if you are married and have a family, it reduces the payoff period. Your partner will not risk the vehicle in this case. Disability insurance provides benefits over a set period of time. It would not cover the whole amount of the loan. It even has a start date that begins when you are disabled. It doesn't start working right away.

This is a lengthy article, but the gist of it is this: do your homework at home first. Then get approved online. Then shop on Sunday. Then go get your car and negotiate on everything. It will be the easiest car-buying experience you have ever had. 

Regardless of your credit situation, if you follow my steps, you’ll have a car in no time and you’ll be an educated and informed customer during the process. Good luck!

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