Can I Still Get Car Finance With a Bad Credit Rating?Published Monday, March 14, 2022
Trying to navigate the world of car finance with bad credit can feel discouraging, especially if you've already applied for loans and haven't received approval. Unfortunately, far too many traditional lenders are biased against people with bad credit, making it that much harder for them to finance a vehicle. On the other hand, some lenders prey on people with bad credit, taking advantage of them because they're more likely to accept poor loan terms due to their limited options.
Although having poor credit is an obstacle to obtaining an auto loan, it doesn't mean you don't have any options. In this article, we discuss where you can get car finance with bad credit, tips for applying, and how you can increase your chances of getting generous terms and loan approval.
Westside Auto Wholesale: Your Trusted Source for Pre-Owned Cars in Perth and Western Australia
At Westside Auto Wholesale, we specialise in financing auto loans for people with bad credit. We have the largest selection of used cars in Australia, with over 2000 to choose from at our Perth warehouse. Our pre-owned vehicles are always reliable, high-quality, and affordable. Our flexible financing options make it a breeze for you to get a new ride, even if you have a bad credit history.
We also offer a range of customized car finance packages to suit your budget, including business vehicle loans and salary packaging. If you're just starting the process of buying a new car, you can speak with our on-site finance managers and get a free, no-obligation quote so you can explore your available options.
Keep reading to learn more about how to get car finance with bad credit, then call us at Westside Auto on (08) 6145 0099 to explore your options with one of our professional finance managers.
Can You Still Get a Car Loan with Bad Credit?
If a bank has rejected you for an auto loan in the past, you probably aren't very eager to go through the application process again. But try not to get disheartened. It's entirely possible to finance a car, even if you have a tarnished credit history.
Credit Unions and Banks: Unfortunately, credit unions and banks usually have stringent eligibility requirements that cater to applicants with good or excellent credit. While you're free to apply, keep in mind that people with poor credit scores are unlikely to receive loan approval from a bank—and if you do receive an offer, it will probably have a high interest rate and poor terms. You may want to shop around and see if you can get pre-approval, but be careful to read the terms before signing anything. Personal loans through a bank often have hidden fees that add up very quickly.
Dealership Financing: If you have a bad credit history, dealership financing is an excellent option to consider. Although the dealership arranges the financing, a third-party lender holds the actual loan. However, that's to your benefit, as the dealer can shop your application around to find you the best possible rate. It's one of the easiest methods to get a bad credit car loan and Westside Auto Wholesale can help you with this.
Secured Auto Loan: If you accept a secured auto loan, the lender will repossess your vehicle if you fail to make the payments. While this represents less of a risk for the lender, it raises the risk level for the borrower. If you choose this option and something unexpected happens (for example, you lose your job or cannot make your payments for any reason), you could wake up one day and walk outside to find an empty driveway.
Guarantor Loans: If you have a friend or family member (with good credit) who would co-sign on a car loan for you, you could use this to negotiate more favourable loan terms. However, keep in mind that this puts a lot of risk on the co-signer. If you can't make the monthly payments, the onus will be on them to pay.
Which option is the best for borrowers with bad credit? Of the options we just listed, dealership financing is one of the best choices. For example, here at Westside Auto, we offer our customers a range of options when they need a car loan, no matter how low their credit score is. Our finance team will help you through every step of the application and approval process, making it much easier for you and far less stressful than applying for a personal loan at a bank.
Tips for Financing a Car with Bad Credit
Trying to get car finance with bad credit isn't always easy. However, you can use these tips to improve your chances of getting a bad credit car loan. Here are some steps you can follow:
1. Check Your Credit Score
As you already know, your credit history directly affects your eligibility when you're trying to finance a new car. Australia has three credit bureaus: Experian, Equifax (previously VedaScore), and illion. When these bureaus calculate your credit score, they consider several factors:
- Negative items
- Repayment history
- Open credit accounts
- How many credit checks are on your report
So, what is a "bad" credit score? Each bureau has a different credit rating system, but we'll use Equifax as an example. On the Equifax scale, any score lower than 500 is bad, with scores 400 or less considered "very bad."
Before filling out a loan application, always get a copy of your credit report so that you will know what a lender will see when they perform a credit check. Plus, it gives you get the chance to check for inaccuracies and have them removed before you apply.
2. Save Money for a Down Payment
If you're going to purchase a car, take the time to save up as much money as you can before submitting your application. If you're unfamiliar with the term, a down payment is the sum of money you give the dealership upfront when buying a car.
Down payments go towards the vehicle's purchase price, and then you finance the remaining cost. Therefore, the more money you can save for your down payment, the lower your loan amount and monthly payments will be. For this reason, you should save as much as you can to put down when you buy your new car. Plus, it positions you as a more attractive and competitive borrower and could even help you get a lower interest rate.
3. Determine Your Budget First
Before you apply for financing, take the time to sit down and calculate your budget, expenses, and how much you can afford every month. However, purchasing a car requires more money than just a down payment. You'll also need to pay for insurance, petrol, maintenance, unexpected repairs, etc.
When calculating your budget, consider your monthly income, overall debt, and how much you can afford to pay each month. By arming yourself with this information ahead of time, you can make your search for a vehicle easier and faster since you'll already know what you can and can't afford.
4. Stick to Your Budget, and Sacrifice the Extras
Remember, financing a car with bad credit means you'll pay higher interest rates than someone with good or excellent credit. Once you determine your budget, stick to it, even if that means sacrificing luxuries like leather seats or a premium sound system.
However, you can gradually improve your credit score by financing a car and making the payments on time. Then, when you're ready for a trade-in or a new car, you'll have a higher credit score, and you can get a better car with more bells and whistles.
Benefits of Choosing to Finance Through a Dealership if You Have Bad Credit
Are you curious why dealership financing is the best choice for buying a car if you have bad credit? Let us tell you about the numerous benefits you'll get from choosing a dealership to finance your next vehicle compared to other options, like a personal loan.
Fast Application and Approval Process
When you choose a dealership to handle your financing, you can expect the application and approval process to take place quickly. A personal loan from a bank or credit union usually takes a few days at the very least, and at the most, a couple of weeks. After all, nobody wants to choose a new car, take it for a test drive, then have to wait days or weeks to come back and pay for it before they can drive it home.
For example, let's say you were to finance a vehicle here at Westside Auto. First, we'll help you find the perfect car, and then we introduce you to meet with one of our finance managers. They'll walk you through the application process, and if you agree with the terms, you can sign the agreement that same day and drive your new car off the lot. You won't have to wait days or weeks to take home your new car!
Lower Interest Rates
Compared to taking out a loan at a bank or credit union, financing through a dealership can result in lower interest rates. Remember, higher interest rates will force you to pay more—sometimes thousands more—than the total value of your car throughout the loan's lifetime.
Many dealerships have an extensive network of lenders they work with, which allows them to shop your loan application around and get you the best possible interest rate. Plus, dealerships want you to purchase a car, so you often have some wiggle room for negotiating. Personal loans from a bank do not offer the same opportunity for negotiating that you would have at a dealership.
Lower Monthly Payments
Lower monthly payments are another significant benefit you'll enjoy when choosing a dealership to finance your new car. Many dealerships offer what's known as a "balloon payment" as part of your loan. It's a larger-than-normal payment that takes place at the end of the loan period, effectively reducing the monthly payments you'll be responsible for over the lifetime of the entire loan.
Finance Your Next Car and Drive Home Today with Westside Auto Wholesale
If you're trying to get car finance with bad credit, finding lenders who offer generous loan terms is often easier said than done. However, that doesn't mean it's impossible. In fact, you have more options than you might think.
At Westside Auto, we provide straightforward financing options for our customers, giving them expert assistance throughout every step of the process. We also offer the largest selection of used cars in Australia in one spot, with over 2000 quality vehicles at our warehouse in Perth.
Our finance managers have experience working with consumers who have poor credit, and we offer a range of different financing options to help you buy a new car with no extra hassle or stress. Call us in Perth at Westside Auto on (08) 6145 0099 to learn more about our financing options and request your no-obligation quote today here.