Most Americans prefer to buy a new car every three or four years, yet most buyers finance vehicles for five or six years. If you are in the middle of a long term loan and decide to trade in the vehicle that you're still paying for, you are likely to find that you actually owe more than the car is worth. This is called being upside-down in your car loan. When this happens, the difference between what you owe and what the car is appraised for is added to the financed amount of the new car loan, in the event that you are able to find a lender who will allow you to "roll over" this amount. If you have a high FICO score, this situation may not prevent you from being approved for a loan. However, if you have poor credit, it is more difficult - especially with no money down.If you are able to buy a car with poor credit, 0 down (with a trade-in) and rolled over negative equity, you should be very flexible with which vehicles you are willing to purchase. At DriversLane.com, we specialize in matching car buyers with special credit needs with new and used car dealerships that can get them approved.
- Upside Down
- Owing more on your vehicle than what it is worth, this is also known as Negatibe Equity
- No Money Down
- Having no cash or trade equity, typically meaning no money out of pocket
- Poor Credit
- Having a FICO score under 620
Poor Credit Auto LendersIf you have a credit score that is under 620, your options for an auto loan provider will likely be limited to special finance or subprime lenders. And while you can obtain auto financing with poor credit and possibly no money down (if there is enough cash equity in your trade-in vehicle), keep in mind that a higher interest rate will make it very easy for you to become upside-down in your loan.
Negative Equity and Zero Down PaymentThe best chance a consumer has in this scenario is to buy a lower priced new car that comes with a large cash rebate. Keep in mind, however, that the primary reason that manufacturers offer large cash rebates on specific models is because they are not selling.
Who Qualifies with Zero Down?
- People with no credit score and one year on the same job.
- People with a thin credit history and two years of continuous employment.
- People with a pre-tax monthly income over $1,560.
- People that are flexible with the cars they are willing to drive.
- People with no repossessions in the last year, unless included in a bankruptcy.
- People willing to drive a few extra miles, to get approved with no down payment.