You are about to learn little known secrets about the car business and bad credit auto financing. If you've been turned down for car credit, read this article in it's entirety and I guarantee it will open your eyes to facts that you never knew about dealerships and bad credit car loans.
Good People, Turned Away, Everyday...
Dealers turn people with bad credit away everyday without telling them where they can go to get approved for a bad credit car loan, outside of a car dealership.
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Why?
Car dealerships mark up interest rates and make thousands on financing contracts and especially, bad credit car loans. Frequently, a dealer will advertise a car being sold at invoice. You see it on the TV and hear it on the radio, all the time. This is because the dealer can still make loads of money on the financing contract. I'm not referring to in-house financing or buy here pay here car lots... I'm talking about regular dealerships that submit your credit application to outside lenders. They make money on the contract that they get you to sign. It doesn't matter what company they get you approved with. They will make money on the loan contract. If they can't make money on the loan contract, guess what... you're turned down for car credit.
What this means for you is, if a car dealership submits your credit application to a loan company and gets you approved, and the dealer can make money on the contract, you will NOT be offered the interest rate that you are approved for.
You will be told you've got to pay more, especially on a bad credit car loan.
This is 100% rock solid truth and most people are shocked to find this out...
If you're financing is approved at 9%, the dealer may very likely tell you that you are approved at 11%, 12%, 13%, 14% or much more. Dealers call it adding "points" which is an elegant way of saying, "I'm jacking up this customer's interest rate!". Bad credit auto loans frequently have several "points" added by the dealer. The dealer can get away with it because people with bad credit are generally desperate to just "get approved" and will sign just about anything. Getting approved is a carrot that the dealer holds in front of you and you're supposed to be the rabbit running for it. Asking you about all of the blemishes on your credit report is to "remind you" that you'll have a hard time getting approved. It makes you run for the "approval" carrot. Run hard and you'll get nailed with a higher interest rate than you would have had to pay, had you been smart and got your financing elsewhere.
You see, the difference between the interest rate you are approved at (dealer cost) and what interest rate you are told you'll have to pay (contract selling price), is nothing more than PROFIT for the dealership.
This results in $40, $50, $100, $150, $200 dollar a month jacked up car payments for you.
Dealers call the money made on adding "points" (jacking up interest rates), "backend profit". The selling price of the car above cost is called "frontend profit". You can negotiate the price of the car down to cost. Dealers advertise new cars at invoice all the time.
Why?
You'll still make the dealer thousands when you get into the finance manager's office to sign the contract.
Thousands of dollars. In most cases, dealers make more money on new car "finance" than they do on sale price. If a good credit customer walks in with a Credit Union or Bank Draft to buy a car, the finance manager will try to talk the customer into using the financing the dealer can get them. Dealers will try to talk cash paying customers into financing the car. It's all about "backend" profit. It's where dealers make their easiest money... on loan contracts.
Down Payments, A Dealership Cash Cow...
Have you ever wondered why a car dealer who gets a customer approved for a $20,000.00 loan would ask for a $1000.00 down payment? After all, if you can get a $20,000.00 loan, why would the lender or dealer ask you to come up with a $1,000.00 down payment? Is your credit $1,000.00 shy of getting a whole loan?
Absolutely Not. He's just working you for cash.
He's "requiring" a down payment because the loan company tells them that the car is not worth the selling price. Either the loan company has told the dealer that they will not loan the full amount asked for the car (because they are selling it at too high of a price vs loan value) or, the dealer is trying to get extra money that will be profit on top of a legitimate selling price.
Here's why a dealer does NOT need a down payment, legitimately...
It's very common for a dealer to tell a loan company that the selling price is $2,000 or $3,000 dollars above what the real sale price is. They then put on paper that you've put down that 2 or 3 thousand dollars as a down payment. This makes it look good on paper to the loan company.
So if they "make up" fictitious down payments all the time on applications, why would they need your hard earned cash to for a down payment?
They don't.
Not to get you approved for a bad credit car loan, if the car is priced fairly. Only if they are charging too much in the eyes of the finance company (more than the loan company thinks is reasonable according to loan value).
Bad credit does not mean you need a down payment to get approved for bad credit auto loans!
The Smartest Thing You Can Do to Help Yourself...
The smartest thing that you can do, if you have bad credit is to get a bad credit car loan outside of a dealership finance department and you don't need a buy here pay here car lot, either. What I'm telling you is that if you want to avoid down payments, get a bad credit car loan with no money down, get lower interest rates that aren't jacked up and don't have any "points" added to your loan, the best way for you to get a guaranteed bad credit car loan approval is to get online and find a lender that will work with you directly.
Look, regardless of past repossessions, bankruptcies, judgements, liens, collections or slow payments, people in your shoes get financed everyday. You just can't rely on a dealership to get you financed and to give you the best deal you can get.
Just understand this simple point... A vehicle is loan collateral, meaning that a car loan is a secured loan. Secured loans are 10 times easier to get than unsecured loans, like credit cards. You're not asking for a lender to just give you cash to go spend. You're asking them to loan you money to buy a car and they will hold the title to the car as collateral until you pay it off.
You can get approved if you give lenders that specialize in helping people like you, a chance. So long as the price of the car is reasonable and is good loan collateral, and you have a job to make payments, I can bet from my years of experience in the car business helping people with bad credit, there's a 99% certainty that you can get a guaranteed approval with no money down bad credit car loan.
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