How to Buy a Car with Poor Credit and Zero Down
8 Easy Steps to Buying a New Car
Anthony Coe, Yahoo! Contributor Network
Oct 13, 2006 "Share your voice on Yahoo! websites. Start Here."
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We've all seen the late night and Saturday morning infomercials aimed at people with poor credit ratings who need to buy a car. They will sell you a car, but you are going to pay through the nose. You could end up with an interest rate as high as 20 to 28% annually. If you have a credit rating of 720 or higher you can get financed for as low as 3.9%, during special promotional deals. Most people I know, except for my father-in-law, don't have perfect credit. No matter what your credit rating, you may be paying too much for that new car. I don't have perfect credit and I just bought a new 2007 Toyota Corolla CE for over $1,000.00 below invoice and I negotiated my interest rate and loan length down. Oh yes and here is the best part. I paid zero down and I have 45 days until my first payment is due.
Now that I have your attention, I'm going to show you how you can be driving away in your dream car in eight easy steps and in five days, with no money out of your pocket (except for insurance, if you don't already have auto insurance).
Step 1: Monday - Get pre-approved online.
Pre-financing is the single most powerful tool you have. It takes about 24 hours to get pre-approved online. I went to Road Loans (http://www.roadloans.com) and filled out the simple online application. The next day I received an email stating that I was pre-approved and I was given a number to call to complete the application process. I called and after verifying my information my approved financing paperwork and a blank check was expressed mailed to me. I was approved for a loan for $22,000.00.
I went to other sites and some were able to approve me for a larger amount, but the terms with Road Loans worked best for me. I suggest you apply to no more then three companies at a time. Depending on your credit rating you may get a better offer from certain sites then others. Just as auto insurance companies specialize in drivers with poor driving records, there are loan companies that specialize in consumers with poor credit ratings.
If you have good credit, get pre-financed through your bank or credit union. Never get pre-financed through the dealer. If your interest rate is too high or the length of the loan is too long, it will not matter how great of a price you bought your car for, you will pay thousands more then you thought you saved.
Step 2: Wednesday - Budget car loan your payments.
Wednesday evening I came home and my pre-approved loan papers were in my mail box along with the blank check. Now that you know what the maximum you can spend and what your loan rate is and the length of your loan, you are ready to decide how much car you can afford, to do this logon to any car dealer site. Most have the option for you to estimate your monthly payments based on interest rates and loan length. Please don't waste your time looking at used cars, even certified pre-owned. Why do you want someone else problems? You are only interested in a new car. You have the most buying power with new cars.
I went to Car Max (http://www.carmax.com) and looked at cars I liked. Once you find a car you like click on the link that will show you more information about that car. You will usually find a payment estimating calculator link. For example, a car with a sticker price of $16,818.00 after tax and licensing and zero down (not even a trade-in) the total finance cost is $18,018.00. With an interest rate of 12.9% and a loan length of five years your monthly payments will be approximately $409.04. Your total repayment cost will be $24,542.40. Now if you wanted to keep your monthly cost lower for the same car you could take a