How to Get a Used Car With Bad Credit

By Angela Monroe - April 15, 2019

You’ve struggled with your finances and suffered from bad credit. Now you’re planning to buy a used car to save money and pay off your debt faster. Unfortunately, it’s not that simple to start with a clean slate.

Bad credit can wreak havoc not just on your personal finances but also on your borrowing power. It can be difficult to be approved for loans, especially major financing like a car loan.

But it’s not impossible. There are many ways to get a used car even with a tarnished credit history. The car loan experts at Loans For People With Bad Credit offers the following advice:

1. Secure a bad credit car loan.

The car loan experts can pair you with the best lenders that offer bad credit car loan, also known as a second-chance car loan. This type of car financing is especially designed if you have bad credit issues, including:

  • Having paid or unpaid defaults, including credit card defaults
  • Car repossession experience
  • Discharged bankruptcy
  • Discharged from a Part 9 Debt Agreement
  • Having made too many loan enquiries
  • Not having a credit history

Car Dealership With Subprime Lenders

Bad credit car loans are typically offered by subprime lenders who mainly work with people who have a bad credit history and do not qualify for prime loans. The loans are offered at a rate above prime. Subprime lenders may also set specific requirements for approval, including a minimum income, employment and residency.

It’s hard to apply directly for a loan with subprime lenders because they usually work through another party. Your best option is to contact one of the finance brokers at Positive Lending Solutions who work closely with them and can discuss car loan options on your behalf.

2. Get an in-house financing dealership.

Also called “Buy Here Pay Here” or “Tote The Note”, this financing is offered directly by the car dealer that you’re buying the vehicle from. Getting approved is generally easy as long as you make a qualifying income. The process is also simple, unlike the loan process with banks or credit unions, which can take a while to complete especially if you have bad credit.

In-house financing dealership is also more flexible when it comes to accepting trade-ins on older model cars. They are more likely to accept your car as part of the down payment since they easily find a buyer for the vehicle.

However, there are also several cons with Buy Here Pay Here dealers, including:

  • High-interest rate and large down payment. BHPH dealers ask for bigger down payments and higher interest rates than traditional auto lenders since they work with people with high credit risk. Expect to pay an interest rate as high as the maximum rate allowed by law in your state, plus a slew of hidden fees.
  • Limited car selection. Instead of you picking a car and then discussing the various financing options with lenders, BHPH dealers usually determine your eligibility first before showing you which cars you qualify for.
  • High chance of repossession. BHPH dealers usually provide less leeway if you’re struggling with your repayments.
  • No credit score improvement. Unlike with borrowing money from subprime lenders, in-house car financing will not you improve your credit score despite paying your loan on time. This is because loans or payments are usually not reported to the credit bureaus.

3. Borrow money from credit unions.

These non-profit organizations that offer loans and provide a wide array of other financial services are generally more lenient with their loan qualification requirements, even with auto financing for problematic credit. However, you may need to become a credit union member first before getting approved.

4. Get a cosigner.

You may be able to obtain a car loan despite bad credit through the help of a cosigner with a good credit score. This person signs the loan with you and is bound to repay the loan in the event you can’t. Lenders are more likely to approve your loan because they have a bigger guarantee that the loan will be paid back.

5. Provide a bigger down payment.

If you have bad credit, it will limit the amount of car loan you can get. The high-interest rate will also make the amount even lower. A down payment can offset the interest, taxes, and fees and widen the selection of vehicles you can choose from. The recommended down payment is generally 10 per cent of the car’s value.


Get a Free Credit Check to know where you stand when it comes to applying for finance.

To get a full personalised quote on the used car that you want to buy, use our Bad Credit Car Loan Pre-Approval form. Our bad credit car finance specialist will contact you on the phone number you provide to discuss your finance options.


Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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