After a repossession, you still probably need a vehicle! It is sometimes possible to get into another car after a repo, and your chances of an approval increase if you work with the right lenders and have a large down payment.
After a Repossession
Immediately following a repossession, your credit score is likely much lower than it was before. Not only do your credit reports now reflect a repo, they also show a default and the missed and late payment(s) that led to the repossession.
If your vehicle was sold at auction and you didn’t pay for the remaining balance on the loan (deficiency balance), that balance may have been sent to collections, wreaking even more havoc on your credit reports.
With all this damage to your credit, the odds of getting approved by a traditional auto lender are extremely slim. However, the damage won’t stay on your reports forever – only up to seven years. Each year, the negative impact of a repossession (and everything else that comes along with it) lessens.
One of the first things you need to do after a repossession is check your credit reports yourself. You should know exactly what lenders are seeing when you apply for new credit.
Now and until April 2021, you can review all three of your credit reports for free once a week. This means you can keep track of your credit in real time, and work to improve it. You can pay your debts and see a direct impact in your score. If you notice any inaccuracies on your reports, you can also work to get those fixed and removed to help rebuild your credit after a repo.
Increasing Approval Odds for a Car Loan
To improve your chances of getting approved by a car lender, you may need to work with one that doesn’t review your credit reports, called a buy here pay here (BHPH) dealerships. BHPH dealers are different from traditional dealers, since BHPH dealerships offer in-house financing. This means all car shopping and lending is done at the same place, and your dealer is also your lender. Since these dealerships don’t rely on third-party approvals, many don’t check your credit when you apply for an auto loan.
You could also work with a subprime lender, once the repo is over a year old. Subprime is another word for bad credit, and these lenders do review your credit reports when you apply, but they also look at many other factors in addition to your credit score. These lenders work through dealers’ special finance departments, and they’re known for working with bad credit and post-repo borrowers.
When you work with a BHPH dealership, your credit score may not improve because of the car loan. Some don’t report loans to the major credit reporting agencies, so even if you make every payment on time, if the loan isn’t reported, it won’t improve your score.
Subprime lenders, on the other hand, always report loans to the bureaus. Both types of lenders report missed and late payments, defaults, and repossessions. If you’re concerned about repairing your credit history after a repossession, ask your lender if they report their loans.
Down Payments and Bad Credit
Whichever type of lender you choose to work with, you’re going to need a down payment to be considered for an auto loan. While saving for a down payment can be a hard requirement for some, it's in your best interest if you're a credit-challenged borrower. Not only do you need one to get into your next car loan, but having one can save you money over the loan term.
BHPH dealers can require a down payment of 20% or more of a vehicle’s selling price. Subprime lenders vary on this, but they tend to require at least $1,000 or 10% of the car’s selling price (sometimes whichever is less).
The down payment amount is largely dependent on the year and mileage of the vehicle you’re looking to finance, and the monthly payment you can afford. Both types of lenders review your monthly income, and determine how much you can afford to pay each month.
After a repossession, it isn’t the best time to look to finance your dream car. However, you should still look for a reliable, used vehicle that you can comfortably afford until your credit history shakes off the damage from your repossession.
Bad Credit Car Dealerships
It can take some time and patience for your credit to heal after a repossession, and it's certainly possible to get into another car loan after one. This is because there are bad credit auto lenders available all over the country that can help credit-challenged borrowers get into another vehicle.
If you’re having trouble finding a lender that can work with a repossession on your reports, we want to help. At Drivers Lane, We know which dealership’s have bad credit lending options for all types of unique credit situations.
To get matched to a dealer near you, complete our free car loan request form. It’s secure, completely online, and we’ll get to work right away!