Everyone needs a car, but when you don’t have much in savings, it’s hard to afford a good reliable used car or truck. With most vehicle purchases, a financing transaction will occur. This will involve investing a down payment that will go toward the price of the car and lower your overall amount financed. The more down payment you invest when financing, typically the lower and more affordable your payment options will be. It’s a challenge to obtain a car loan with a low down payment or even without a down payment at all. In these cases, you may need to trade your current vehicle in, as a form of down payment toward your new purchase.
If you are located in the Dallas, Irving, Arlington, the surrounding areas, you are in luck! We’re proud to provide a wide range of used cars in Dallas and other parts of the Dallas Fort Worth metroplex, as well as low down payment cars. Not to mention, we offer assistance with no credit financing, which includes a variety of bad credit history that you may have built through your time financing previous vehicles. If you share a similar past as described above, but ready to change your future, then don’t worry! We’ve helped thousands of DFW residents just like you with reliable transportation and affordable financing. Let’s talk about some of the things that might help you as you go through the financing process.
Does my Credit Score Matter?
As mentioned above, no credit or bad credit can stop a majority of customers from getting the affordable financing they need. For those who have a reasonable score, not only are you generally eligible for lower interest rates, you also are likely to have much more luck with securing a loan despite low or no funds available for the down payment.
When you really break it down, the down payment and credit score are both forms of risk management for the lender. By securing a lump sump from the borrower at the outset of the loan, the lender confirms there’s a financial interest from the buyer and also is able to see their ability to generate funds; on the flip side, a good credit score shows a lender that you have a history of creditworthiness and repaying your debts on time, which mitigates their risk when loaning to.
Now that we understand the importance of down payment and credit, we can confidently say that the easiest way to finance a used car with a low or nonexistent down payment is this: Raise your credit score as high as you can. If you can get your score up to 670 or especially over 700, you’ll have a much higher chance of convincing a lender to work with you despite limited down payment funds. If your score is between 580 and 669, meanwhile, you may be approved for no or low down payment – but in exchange, the lender will hit you with a higher interest rate for the entire loan. Meanwhile, if your score is below 580, you might be denied a car loan entirely.
As we’ve learned, it’s important to check your credit report and confirm it’s accurate. If it’s not, we recommend calling to dispute the errors with the relevant credit bureaus. If you’ve done this, it’s time to start the process to improve your score however you can before applying for a car loan, including paying bills on-time, keeping balances low, and not closing any older accounts just before applying.
In-House Financing Car Lots in Dallas Fort Worth
Financing a vehicle is not like financing a home. Car loans can vary drastically. The rates and options you find from one lender might vary significantly from another. You should spend time shopping around for multiple options to get an idea of the lay of the land, plus to evaluate the best choices available. Be prepared as you do this research: Know the general market rates and some of the basic terms you’ll need, as this will allow you to hold your own in conversations with lenders who are already experts in the field.
Should I Use a Co-Signer to Get Approved for my Auto Loan?
For those who have evaluated their options and looked to up their credit score but are still having issues, you might consider speaking to a family member or a close friend who would cosign a purchase with you. It’s vital that you pick someone you trust here, and vice versa: If something were to go wrong with repayment of the loan, your cosigner would be on the hook as well as you.
If you’re able to arrange such an agreement with someone close to you, this will often allow you enough purchasing power to avoid a down payment. However, do be aware that lenders may still require somewhat higher interest rates for these kinds of loans than for those you qualified for on your own – this is because they know that the car is likely for the person with the weaker credit score, and this will be factored in. However, this is still easily worth it for many buyers simply for the removal of the high down payment requirement.
We’re always here to help!
We’ve reviewed the different ways that may be effective for both a low down payment and no down payment at all here, but there’s one theme that applies almost universally here: Some is better than none. Vehicles are known for how quickly they depreciate, and making no down payment whatsoever may lead to a situation where, if you aren’t careful, you’re upside-down and unable to get out from under the debt burden of the car. If the outstanding balance of your loan exceeds the resale value of the car, you might even have to come out of pocket for a significant sum.
In addition, numerous lenders are much more flexible with down payments today than in previous generations. You don’t necessarily have to have 20% of the purchase price to put down – there are many situations where you can come up with far less and still obtain a good loan. If it’s possible to delay your purchase by even a few months to raise some funds for even a small down payment, we recommend this.
If you’d like more information about financing a car with a low or no down payment, or to learn about any of our auto dealer services, speak to one of our finance specialists at the Auto Cave today