Posted Friday, Feb 28, 2025
Buying a used car can feel like planning a road trip. You know where you want to go but figuring out how to get there can be tricky.
Whether your credit score is smooth sailing or has hit a few bumps along the way, buying a used car can still be a rewarding experience. With the right financing in place, getting a used car can become a stress-free experience for you.
In this post, we’ll break down how used car financing works, no matter your credit score.
Explore the options that can help you drive off the car you need!
What Is Auto Financing
Auto financing is basically borrowing money to buy a car and then paying it back overtime with a little extra called interest. There are two key parts to auto financing:
This is the total cost of the car after subtracting any down payment you make.
This is the fee for borrowing the money, shown as a percentage of the loan amount. Typically, the better your credit score, the lower your interest rate.
You can get auto financing from different places like banks, credit unions, online lenders, or even directly from dealerships that offer in-house financing. Your credit score and a few other factors usually determine the loan terms, including the interest rate, loan length, and monthly payments.
Understanding Credit Scores and How They Affect Financing
Your credit score is a big factor when it comes to the financing options you can get. Think of it as a three-digit snapshot of your financial habits. The higher the number, the better your chances of scoring a loan with lower interest rates and better terms.
Excellent Credit (750 and above):
With an excellent score, you’re in the best position to get the lowest interest rates, which can save you a lot of money in the long run.
Good Credit (700-749):
A good score still opens the door to competitive interest rates and flexible loan terms.
Fair Credit (650-699):
Financing is still possible, but expect higher interest rates, which means paying more overtime.
Poor Credit (600-649):
It might be a bit tougher to get approved, and interest rates will be higher, but options are still available.
Very Poor Credit (below 600):
Getting to finance can be challenging, but some lenders and dealerships specialize in helping people with low credit scores—just be prepared for higher rates.
Financing Options for Buyers with Any Credit Score
Dealership Financing (Buy Here, Pay Here)
Dealership financing, commonly known as "Buy Here, Pay Here" (BHPH), is a popular option for buyers with little or no credit. These dealerships offer you the option to purchase the car and make payments directly to the dealership rather than a third-party lender.
| Pros | Cons |
| ● Easy approval process
● No credit check in some cases ● Ability to finance a car even with a low credit score
|
● Higher interest rates
● Fewer vehicle options ● Cars are often more expensive
|
Vehicles purchased from BHPH dealerships may have higher long-term costs. If you don't want unwanted surprises knocking at your door, make sure to read everything before signing any financing deal.
Subprime Auto Loans
Subprime auto loans are specifically intended for borrowers who have lower credit scores. Lenders may provide longer repayment terms or lower monthly payments to make the loan more manageable, helping you get the car you need while rebuilding your credit over time.
| Pros | Cons |
| ● Available at traditional lenders and credit unions
● Allows you to finance a car without relying on a dealership
|
● Higher interest rates
● Larger monthly payments ● Shorter loan terms
|
These loans usually have higher interest rates, but they can help you finance a used car even when your credit history is telling a turbulent tale.
Before applying for a subprime loan, it's a good idea to shop around and compare offers from different lenders. Sometimes, even a small difference in interest rates can make a significant impact on your monthly payments and the total cost of the loan.
Credit Unions
Credit unions can be a great option for auto financing, often offering better loan terms than traditional banks. If you're already a member, it’s worth checking out their options. Many credit unions are known for working with people who have credit setbacks and may offer lower interest rates on used car loans.
| Pros | Cons |
| ● Lower interest rates than many other lenders
● More personalized customer service
|
● It may require you to become a member first
● Loan approval process can take longer
|
Many credit unions have partnerships with local dealerships, which can make it easier to find everything in one place.
Online Lenders
Online lenders offer a streamlined application process and competitive rates, but the terms may vary depending on your credit history.
| Pros | Cons |
| ● Fast approval process
● Sometimes better interest rates than those traditional banks ● Flexibility in choosing your car
|
● Not all online lenders work with buyers with low credit
● It may be harder to negotiate terms
|
When using online lenders, double-check that you're dealing with a reputable provider. It's always best to prioritize safety!
Personal Loans
Another option worth considering is taking out a personal loan to buy your used car.
| Pros | Cons |
| ● No collateral is required (the loan is unsecured)
● Potentially lower interest rates than auto loans if you have good credit ● Flexibility to borrow any amount
|
● Higher interest rates for lower credit scores
● Shorter repayment terms compared to car loans
|
With shorter repayment terms and higher rates for poor credit, personal loans might not always be the most budget-friendly option.
Tips for Financing a Used Car with Any Credit Score
Start by saving for a larger down payment. The more you can put down upfront, the less you need to borrow, and lenders see that as a sign of financial responsibility.
Next, do not settle for the first offer you get. Shop around and compare rates from banks, online lenders, credit unions, and dealerships. If your credit is not great, consider asking a co-signer with good credit to help. Don’t forget the lenders are on the hook if you miss payment.
Also, check your credit score before applying. If it is low, try improving it first because it could save you money in the long run.
Finally, learn about the interest rate, fees, and total loan cost. Sometimes hidden fees can sneak up and increase the price of your car.
Your Next Car Is Waiting for You
Take the time to research your financing options, compare offers, and consider factors like the down payment and loan terms before deciding.
If you are shopping for a car in Pompano Beach or nearby areas in Florida, visit Marciano Auto Group Inc. Explore our selection of used cars and find the perfect match before you settle on a financing option.