We’ve all see the ads that blare about no money down for qualified buyers. But if your credit is bad, you might be worried that you don’t “qualify” for any car loan, let alone one with no money down. But you can, in fact, get a car for no money down, even with bad credit. You’ll just need to do a little research.
What Is Money Down?
Let’s start with what “no money down” means: Namely, that you make a down payment. A down payment is usually defined as a percentage of the negotiated value of the car. For example, if you’re buying a car for $20,000 before fees and taxes, you could put down $4,000, or 20% down.
It’s not an absolute prerequisite that you put a down payment on a car. It’s popular, and dealerships prefer it, but there’s nothing stopping you from buying a car without putting 15% or 20% of the value down at the dealership. As car prices rise, in fact, the down payment percentages are slipping lower and lower. The downside is that this means your monthly payments will be higher than if you put money down, and you should still save some money if possible to pay for excise tax and other expenses.
The only time a down payment is really required, in fact, is if you finance through a dealership. And since you won’t need to do that, you can set that concern aside. But then there’s the bad credit loan.
Getting The Loan
You should secure your financing before you buy a car for a few reasons. One, it gives you more leverage at the dealership and cuts out a second aspect of negotiation. Two, it means you can just pay for the car and drive it off the lot, no down payments required.
That said, you do need to secure the loan. Start with your basic budget and finances: Get your annual credit report and check it for errors, as even a point or two can make a surprising difference in interest rates. Work out your budget and what monthly payment you can afford.
Next, collect as many quotes as possible from as many lenders as possible. Look closely both at the short term, namely the monthly payments you’ll make, and the long term, or how much interest you’ll pay over the life of the loan. Pick the loan that costs you the least and fits your budget.
Then, and only then, should you go car shopping. Having a hard limit on your financing will be useful in that it will help you rule out cars that you can’t afford, and gives a sales person a goal to stay under. Don’t neglect doing your research online; look up both the dealership you’re considering and the cars they have available.
No matter what, don’t give up. One of the basic realities of many of our lives is that we need a car, and how we buy cars reflects that need. With a little work, a little research, and some smart shopping, you can get a 0 down bad credit loan.