How to Buy a Car with No Credit

by Easton Motors

Buying a car without any credit is tricky, but possible. As with any large purchase, we strongly encourage doing a lot of research about your financial situation first and only then making a purchase. While we realize that some people need a car right away and can’t spend weeks or months planning for this big expenditure, a few key things to keep in mind can make the difference between securing the car loan that you need, and being rejected by a car dealer.

How to Buy a Car with No Credit

As wages stagnate and people face financial setbacks, it is becoming more common to buy a car without credit. According to a report by the Corporation for Enterprise Development, over half of American consumers have subprime credit scores. If you want to buy a car without credit, here are some steps that will help you achieve this.

Assess Your Financial Situation

Buying a car is a large purchase. Before making the investment, take some time to do some research and planning. Assess your financial situation to determine your next steps. Do you have enough money saved up to buy the car in cash? Can you afford the downpayment to buy a car, or do you need more cash? Can you reduce your spending, increase your income, or both? The goal is to be in a financial position where your income is greater than your expenses. If possible, take the time to save up for a larger down payment. This will allow you to take a smaller loan overall with smaller monthly or weekly car payments.

Reduce Spending

  • Lower your energy bill by replacing light bulbs with LED bulbs, reducing your use of heating or air conditioning, unplugging electronic devices when not in use, and lowering the temperature on your water heater
  • Before buying new clothes, consider if any pieces of clothing you already own are appropriate for the occasion
  • Cancel your gym membership
  • Downgrade or cancel your cable service
  • Take advantage of the local library for entertainment options
  • Cook more meals at home
  • Buy non-perishable goods in bulk
  • Lower your cell phone bill

Increase Your Income

  • Ask for a raise at work
  • Start a side hustle business
  • Sell items on eBay
  • If you can make things, sell your handmade goods on Etsy
  • Offer creative services on Fiverr
  • Join the sharing economy by driving for Uber or Lyft, or rent out a room in your home on AirBnB

Check Your Credit Report

Regardless of whether you have no credit, poor credit, or great credit, it is useful to check your credit report before trying to get financing. You are entitled to a free copy of your credit report once every 12 months. Make sure there are no inaccuracies or errors on your credit report that may result in a higher interest rate or being turned down completely. If you do notice any mistakes on your credit report, dispute the error with the credit reporting company.

If you don’t have any credit history, or it has been a while since you’ve used credit, you may need to consider using credit to establish a recent credit history. One option would be using a secured credit card with a small credit line, using the card for small amounts and paying it off in full each month. After six months, you will have established enough credit history to receive a FICO credit score.

Find the Right Dealership

While some dealerships can only help you once your credit has improved, if you have poor credit, the best option is to find a bad credit car dealer. These dealerships specialize in helping people with bad credit finance the purchase of a vehicle. They are also sometimes known as “Buy Here Pay Here” dealers or “tote the note” dealerships. A Buy Here Pay Here dealer will finance you on their own, without trying to shop out your credit to banks and potentially lowering your credit score.

Once you’ve narrowed your search to Buy Here Pay Here dealers, it is important to note that not all Buy Here Pay Here dealers are equal. Some bad credit car dealers have predatory lending with high interest rates. Look for a dealership that considers your entire credit situation, not just your credit score. They will look at your employment, your housing, your driving record, and personal references. Because they look at the big picture and not just your score, they are more likely to work with you.

Ideally, a good Buy Here Pay Here dealer will also report your payment back to the credit bureaus. This way, as you repay your vehicle loan, your credit score will improve with good payment history.

A good Buy Here Pay Here dealer will sell quality cars and offer warranties. While junk cars may be less expensive initially, they tend to cost more in the long run with repairs and ongoing maintenance. Quality cars are more expensive up front, but are a better option long-term. Make sure you are able to purchase a vehicle with a warranty, whether it is offered by the dealer or the manufacturer.

Time to Purchase

Once you’ve researched, planned, and found the right dealership, it is time to find a car that works for you. While shopping for a car, it is important to consider your needs and your budget. You may not be able to afford the car of your dreams, but look for a car that meets your needs and fits in your budget.

After you have been making on-time payments for a year or two, ask the dealership if they will reexamine your loan. It may be possible to get a lower interest rate after you have proven your ability to make on-time weekly or monthly payments for your car.

What to Do If You’ve Been Turned Down for Credit

Getting turned down for credit can be a disheartening experience. However, it is also a good time to reassess your personal finances and create a plan to meet your financial goals. Consider why a lender doesn’t see your credit history as appropriate for their loan and what you can do to improve your situation. Here are a few helpful steps you can take if you’ve been turned down for credit.

Talk with Your Financial Representative

If you’ve applied for a car loan, a mortgage, or similar lending, you likely have been paired with a loan officer or finance specialist. Through reviewing your loan application, they will be familiar with your financial situation and know what areas need improvement. Your representative wants to help you get the loan you need. Talk with your loan officer or finance specialist to find out what needs to be fixed or improved in order to be approved for credit in the future.

Work on Your Credit “To Do” List

After talking with your financial representative, you should have a clear idea of steps you can take to improve your chances of getting approved for credit in the future. Now it’s time to take action on these steps based on their suggestions. If they suggest reducing debt, focus on paying down your outstanding debt, putting your extra cash toward your payments so you can pay above the minimum. If you owe back taxes or there is a lien on your property, focus on paying off those debts and resolving the lien. If you need housing stability, consider why you move and whether your moves are necessary. These efforts will take time, so be patient in the process.


Are you looking to buy a car with no credit? Call us at 877-254-6855, email us at info@eastonmotors.com, or stop by any of our locations to speak to a Finance Specialist who can help you today!

 

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