Most Americans prefer to drive a newer car every three or four years, yet most of us finance vehicles for five or six years. So when it comes time to trade the vehicle in and buy a new car more often than not, we are upside down in our trade. When this happens the difference between what we owe and what the used car appraised for is added to the finance amount of the new car loan. This is usually not an issue if you have a high FICO score. If you have, however, poor credit, it is more difficult, especially with no money down.
Since repossession happens more often to people with poor credit scores, lenders limit the amount they will lend to poor credit car buyers based on the value of the vehicle they are buying. Typically the amount they will lend to people with a FICO score under 600 is 100% of the value. So you can a car loan with poor credit and no money down, or you can get an upside down car loan, just not both.So to buy a car with poor credit, 0 down payment, and roll over negative equity, you have to be very, 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, synonymous with Negative Equity
- No Money Down
- Having no cash or trade equity, typically meaning no money out of pocket
- Poor Credit
- Having a FICO score under 600
Poor Credit Auto LendersIf you have a credit score under 600 you're auto loan will only be considered by special finance or sub-prime auto lenders. These lenders pay strict attention to the amount they lend versus the value of the automobile. They do this to protect themselves on low FICO score auto financing when the borrower stops making the payments and they have to repossess the vehicle. When a vehicle is repossessed the lender sends it to an auto dealer auction. Once the vehicle sells, they apply the monies to what the borrower owes.
Since repossession happens more often to people with poor credit scores, lenders limit the amount they will lend to poor credit car buyers based on the value of the vehicle they are buying. Typically the amount they will lend to people with a FICO score under 600 is 100% of the value. So you can a car loan with poor credit and no money down, or you can get an upside down car loan, just not both.
Negative Equity and Zero Down PaymentCombining negative equity and poor credit with zero cash out of pocket is like mixing water and oil. That's not to say that it is impossible for someone who is upside down and has poor credit to get a car loan with no money down, just very unlikely. The best chance a consumer has under this scenario chance is to buy a low price new car with a large cash rebate. Keep in mind that the reason 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.