Trying to find a reliable used car may feel impossible, or at the very least difficult, when you have bad credit. However, there are dealerships with special finance departments that work with subprime lenders, and if you qualify, you may be able to get into a certified pre-owned vehicle.
Certified Pre-Owned Cars vs. Used Cars
While it's not impossible for a bad credit buyer to get into a new car, it's much harder than if your credit history was spotless. However, certified pre-owned (CPO) vehicles could be considered the next best thing!
CPO cars are inspected by a manufacturer-certified mechanic, backed by some type of manufacturer warranty, and refurbished before they’re sold. Many CPO vehicles are often just coming off-lease, which usually means they’re newer with low mileage and less wear and tear.
For a car to become a CPO, it generally must go through rigorous inspection, be less than five years old, and meet a mileage standard. While each automotive manufacturer has different stipulations when it comes to their CPO vehicles, getting a full inspection and meeting certain criteria is something that regular used cars don’t have the luxury of going through.
While CPO vehicles are generally newer cars and come with less mileage, they're more expensive than your typical used vehicle. That doesn’t mean you can’t get a reliable regular used car, but the peace of mind that comes with a warranty could also mean potential savings in repairs (and headaches) down the road.
Qualifying for a Bad Credit Car Loan
As great as a CPO sounds if you’re looking for a reliable vehicle without the new car price, you still need to qualify for financing. Having a lower credit score could lead to auto loan denials by traditional lenders, but there are options for borrowers with less than perfect credit scores: subprime lenders.
Subprime lenders work through a dealership’s special finance department. Dealers with special finance departments have the resources to assist borrowers in many types of credit situations, including bad credit, no credit, bankruptcy, and possibly even a credit report showing a past repossession.
Once you find a dealership with bad credit lending options, you’re going to need to meet some stipulations to be considered for a car loan. Typically, these are the requirements most subprime lenders ask you to meet:
- Income – Must have a minimum monthly earned income of around $1,500 to $2,500 before taxes. Proven with computer-generated check stubs that also show year-to-date income.
- Work history – Subprime lenders prefer that you’ve been at the same job for around six months to a year, with some looking for a consistent work history of around three years.
- Residency – Stability is key with subprime lenders, so they prefer that you’ve lived in one area for about a year or more. You can prove this with a recent utility bill or bank statement in your name with your current address.
- Down payment – Getting into a bad credit auto loan means having a down payment. Expect to need at least $1,000 or 10% of the vehicle’s selling price.
- Working phone – Subprime lenders require that you have a working landline or contract cell phone, proven with a recent phone bill in your name. Prepaid phones aren’t accepted.
- Personal references – If you qualify for financing, expect your lender to require a list of around five to eight personal references with complete contact information.
Your personal situation could require more or less items, and being up front with your lender can help make the process a little easier.
It's also important to note that your monthly income and debt to income and payment to income ratios are going to largely impact what you qualify for in terms of cars. Subprime lenders take your information, then they tell the dealer the vehicle payment that you qualify for, and you choose a car from there.
Finding a Dealership With Bad Credit Options
If you think you qualify for a subprime auto loan based on the common requirements, your next step is looking for a dealership with a special finance department. Since subprime lenders work through dealers, getting into a CPO vehicle could be possible with bad credit. These special finance dealerships can be hard to spot, but we want to help with that.
At Drivers Lane, we match bad credit borrowers to dealers that are signed up with subprime lenders. Instead of driving around and looking for a dealership that can work with your credit, fill out our free car loan request form and we’ll do the searching for you. Our form is free, secure, and there’s never an obligation to buy anything.