As a long time auto dealer, I know firsthand that there are many options available to individuals who have less than perfect or poor credit with regard to getting approved for an auto loan. However, be aware that the consequences of having a FICO score below 600 with little or no money down can be financially devastating. It can take years of payments to bring down the principle on the loan which often times leads to an out of equity situation or repossession. For example, a $10,000 car with about a $1000 down will have a person with around a 550 score paying around $400 per month for 60 months. To find a reliable car in that price range often times is very difficult. These budget vehicles usually have ongoing issues down the line when the warranty expires.
As a result, the owner ends up having to pay out of pocket for major repairs along with a high car payment which leads to a repossession. The better your credit is the more options you have with regard to lower payments for a new or newer well equipped vehicle because the interest rate is lower. I would recommend refinancing your car through a bank or credit union after at least 6 on time payments are made. There are a vast number of credit unions that would be willing to take on a loan especially if you have made the payments on time. Often times there are no penalties for prepayment either as opposed to if you’re dealing with a subprime lender. Also, it’s not a good idea to trade out of a subprime loan into a newer vehicle because the value of the car is most likely significantly less than what is owed. Hence, you’d be tacking on more debt at a higher payment. If you’re in that situation you’re better off not instantly gratifying yourself and just paying the car off. Once it’s paid off drive it into the ground and use those extra monies to pay off your debts such as student loans, credit cards, mortgage, etc. After your debts are paid off start investing into your retirement or a college education for your children. You should always have an emergency fund with at least 6 months worth of bills and expenses covered. Save for a rainy day. Many auto dealers use various marketing tactics to lure you into their dealerships. They are wolves in sheep’s clothing. They prey on the weak by advertising low unrealistic payments that in many cases require one to put thousands of dollars down in addition to having excellent credit. Just like that old saying goes “If it sounds too good to be true it normally is”. Nothing is free and these big multi millionaire auto dealers spend ungodly amounts of money to get you in their showrooms so they can continue building their wealth on your hardworking dollar and dreams. Don’t be deceived! Though being said, learn to have patience and pay off your debts so you can pay yourself first. Good things really do come to those who wait.