Woman purchasing a new car

What kind of credit score is needed to buy a new car? Can you even buy a new car with bad credit? These are questions that I’ve dealt with a lot during my time selling new and used cars through many dealerships. It’s an extremely difficult question to answer due to the dynamics involved, but I hope to answer it the best that I can.

Purchasing a new or used car can be quite the hassle. First you have to find the right make, model, color, interior and all the options you need or want, and then you have to test drive the car. If it’s used you have to wonder how the first owner treated the car, which may require more inspection time. But then there’s the financing part of buying a new car.

Financing is the scary part. Finding the right car is a long, tedious process for most of us, but it’s fun! It’s the hunt to find that perfect match for you and your style, and even your ego if you’re like some people. But if you don’t have the cash up front you will be forced to get financing for that car, and that’s when things get a bit more nerve-racking.

The guys in the finance department, the back end of the deal, need to make up for any losses in the front end. If you don’t already have financing (which you should!), you are thrown into this shark tank. I’d hate to make these men and women sound bad, but I’ve worked in this industry for many years and this is simply how they make their (real) money. They are there to make deals for them, not you. They will try to get you to purchase things you do not need, and then they will do their best to get you the best financing possible, for them.

So what if you have bad credit? They can usually get you approved for just about any type of credit, as long as you have “a larger down payment”. This is why I suggest that buyers get financing through their local bank or credit union. This way you can find the loan you need for the car you want and get in and out of financing without paying that car dealership another dime. It’s your money, so protect it.

Credit scores will differentiate with different banks, so your credit score will determine the interest rate(s) you will be given for the loan(s) you seek. It’s well known that Honda and Toyota financing is much easier to get financing through if you decide to finance through the dealership. If you are looking for a Honda or Toyota, I would suggest working with them, but do your best to not purchase anything extra that you do not need. The credit scores are not known, but I have sent customers with 5xx credit scores to friends at these dealerships and got them approved. One customer had around 570 and couldn’t even get special financing through the Chevrolet Dealership that I worked at during that period of time.

Oddly enough, many American dealerships are harder to get financed at, which is strange since they needed government handouts, right? When I worked at a Ford Dealership many years ago they were pretty tough to get loans with anything under 620 or so. The Chevrolet dealership was very similar, although they used more banks. I’ve seen people walk in at 9 in the morning and not walk out until 10pm due to bad credit. This is why I urge people to stick to local banks or simply purchase through dealerships who are easier to work with (Honda or Toyota).

In the end, it’s much easier to purchase a car this way:

1. Find a car you like, then find out the invoice cost(s) on that vehicle.

2. Get pre-approved for financing for that vehicle price that you want.

3. Write or call the fleet manager of that dealership and tell them that you will pay a few hundred dollars above invoice for that specific car. They can find the exact car and they work with volume, so this is an easy sale for them. It usually works that easy.

When you go through financing you will have everything you need. You will be in and out quickly, without having to purchase anything through that dealership other than the car.

Your credit will matter, so do your best to repair your credit so that you can get the best financing options available to you.

Something else to think about, if you don’t want to do the above and just want to walk in and sit there all day, is to make sure you do the following:

  • Do NOT tell them you have a trade-in until you are already down to their FINAL price. Once you’re ready to start signing papers. Yes, they will get made, but guess what? We don’t care. Their entire sales pitch is to make you get mad enough to walk out the door, then when they stop you and get you a “better” deal you will feel much better. This is an emotional roller coaster. A $500 payment looks terrible compared to that $425 payment, even if you just came in wanting to pay $350. DO NOT tell them about that trade-in until the deal is final and you’re ready to sign papers. Trust me. Otherwise they are going to fiddle with the numbers and give you much less for your trade-in, or roll it over into the new car. They want your Business, but they want YOUR MONEY. Don’t give it to them.
  • As with the above, don’t let them know about financing if you have your own. You can get the same financing elsewhere (even better in some cases) than at the dealership. Once you withhold information about your trade-in and financing, you’re golden. You will get the same treatment as everyone else.
  • Look at used cars with just a few miles on it compared to a brand new one, but don’t be fooled into thinking you’re getting a better deal because it’s used. Believe me, there are higher mark-ups on used cars in most cases. The used car guys want to make money. They don’t want “minis,” which is the industry term for “minimum payment for a sale”. New car guys don’t want them either, but the chances of them getting a mini is FAR higher than a used car guy, because you can’t see the invoice on a used car, or even have somewhat of an idea.

Credit scores aren’t the only thing you need to worry about when buying a new or used vehicle. If you can get a co-signer for the new car and you absolutely need it, just do it if it’s the only way to get financed. It’s better than dealing with 18% interest rates. Just make sure you can make those monthly payments. You could save upwards of $100 PER MONTH in interest charges by finding a good co-signer for the car, truck, suv or van.

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