The answer is yes! There are dealers that aren’t concerned with your credit history. But, these dealerships do have their trade-offs, and they’re not your only option in bad credit auto financing.
No Credit Check Car Dealerships
Dealers that don’t pull your credit reports are those with in-house financing. It’s called in-house because all lending is done at the dealership, which means you don’t have to go through a bank or credit union first. With in-house financing, the dealer is also your lender.
Dealerships that utilize in-house financing are often called buy here pay here dealers, or BHPH used car lots. These dealerships only sell used vehicles, and due to the lack of a credit check, they can appeal to borrowers with a low credit score, no credit, or a tarnished credit history.
If this all seems too good to be true, it's not. However, it still might not be a good fit for your next auto loan, depending on your situation. There are some trade-offs to consider, but a BHPH dealer could be your second chance in car financing if you're having trouble getting approved.
There are also special finance dealerships, and they do review your credit, but they also work with bad credit borrowers. We cover both options – in-house financing and special financing – to help you make your next car-buying decision.
Requirements for In-House Financing
In-house financing dealerships don’t usually review credit reports because they just want to know if you can afford the vehicle. This means you should expect to prove your income with computer-generated check stubs, have a down payment ready, and be prepared to prove your identity.
Generally, how much income you bring in is going to impact your car buying ability. The price of the vehicle you’re looking to buy also impacts whether or not you’d be considered for auto financing, and it can determine your down payment amount. Typically, most BHPH dealers require around 10% to 20% of the car’s selling price down.
Since these BHPH dealerships aren’t so concerned with your credit score, another trade-off is the higher-than-average interest rates on their auto loans. However, as a bad credit borrower, this is something to be expected.
If you have a lower credit score, it's pretty standard that you won’t qualify for the best interest rates or loan terms that are available. And while there are lots of bad credit lenders and dealers out there, BHPH dealerships tend to assign the highest interest rates on their car loans.
Another thing to consider is the fact that some BHPH dealers don’t report loans to the credit reporting agencies, which means your auto loan doesn’t appear on your credit reports. Your credit score serves as a way for lenders to gauge your ability to repay credit, and if your loan isn’t being reported, your on-time payment history isn't being reported either, which means your credit score isn't improving from the loan. Be advised that late or missed payments are typically reported by the BHPH dealership, which means your credit score may go down.
While BHPH dealers can have their downsides, they're known for being a quick, one-stop shop when it comes to your car buying experience. You don’t have to worry about bouncing around between the bank and dealership, since everything is all done at one site, making it convenient and quick. If you need a vehicle now, and you don’t have time to wait for pre-approvals or find a lender that can work with your bad credit, a BHPH dealer could be your answer.
The Special Financing Option
Going through a BHPH dealership isn’t your only option as a borrower with less than perfect credit because there are special finance dealers. Like in-house financing, they assist bad credit borrowers and financing and car buying is done at one location, except the special finance manager works on behalf of the remote lender.
Special finance dealerships are signed up with subprime lenders, subprime meaning lenders for bad credit. These lenders do pull your credit reports, but they just don’t turn you down because of your low credit score. They look at many different aspects of your situation to get a better picture of you as a borrower.
For example, many subprime lenders consider your work history during the approval process. The longer you’ve worked in the same area and in the same field, the better chance you have of repaying the loan.
Another thing that reduces your risk as a bad credit borrower is a down payment requirement. Both in-house financing and special finance dealers are going to need a down payment for you to be considered for an auto loan approval. Expect a subprime lender to require a down payment, usually about 10% of the vehicle’s selling price or at least $1,000 (sometimes whichever is less).
As far as income, most subprime lenders require around $1,500 to $2,500 in pre-tax minimum monthly income, but this varies. Other requirements of subprime lenders usually include:
- Proof of a working contract landline or cell phone
- Proof of residency
- Proof of identity
These can usually be backed up with things like bank statements, utility bills, and valid identification. Once you have your paperwork assembled, locating a subprime lender could be tricky, as they don’t tend to stick out from the crowd since they’re signed up with regular-looking dealerships. A good sign is finding a special finance dealer is seeing one that advertises special financing options, or you get in contact with a special finance manager – these are usually telltale signs that they work alongside subprime lenders.
An advantage of going through a special finance dealership over a BHPH lot is that subprime car loans are reported to the major credit reporting agencies. This means your on-time payments are going to be reflected on your reports, which helps improve your credit score for future loan opportunities. When you work with a subprime lender, the goal is to get into a vehicle loan that you can reasonably afford and successfully complete, and help you repair your credit.
Ready to Look for a Dealership?
Whether you’re ready for a car now from a no credit check dealer, or you want to look into special financing, we want to help you take the next step in bad credit auto financing.
Here at Drivers Lane, we have a network of dealerships that spans across the country, and we match credit-challenged borrowers to dealers at no cost. To get connected to a dealership that has the lending options you’re seeking, complete our secure, no-obligation car loan request form.