Do You Need Credit to Buy a Car in Phoenix, AZ?

If you need to buy a new or used vehicle and have poor credit, a Phoenix car dealer will ask whether or not you’re able to place a down payment on the vehicle. If your credit rating is terrible, you’ll most likely need to have a down payment. All car dealers have different requirements for money down, and it could depend on several factors.

Let’s take a look at how various kinds of car dealers and lenders will approve your loan with bad credit.

Credit needed for Buying a New Car in Phoenix

If you’re buying a new car, most new car dealerships can apply discounts and incentives to reduce the down payment. If you’re trading in a vehicle that has negative equity or carries a Phoenix title loan, you may have to provide money down so that it isn’t carried over into your new loan.

While purchasing a brand-new car with poor credit isn’t so common, many manufacturers offer lower priced new vehicles with attractive financial incentives to make buying easier for individuals with lower credit scores. Some car companies are known for their lenient credit financing programs, and this can be something worth looking into if a brand-new car is what interests you.

 

Buying a Used Car with Poor Credit

Purchasing a used car without a down payment requires the right combination of car, book value, trade-in value, and credit rating. Most lenders will only finance a loan that is lower than the book value of the used car. Consequently, you will have to concentrate on vehicles that have an excellent ratio of the sale price to loan value.

This all depends, as every circumstance is different, although it isn’t uncommon for a used vehicle dealership to be capable of working the numbers in your favor so that you can purchase with as little money down as possible.

Buy here pay here dealers generally require money down, and are not as flexible with trade-ins. In case you have negative equity in the vehicle you are trading, you will most definitely be asked for a larger down payment. Typically, a lower interest rate is offered by a buy here pay here if you have money to put down.

How to Increase Your Chances Buying a Car with Bad Credit

  1. Do not act desperate for a car. Make the dealer think you’re just looking and that you have seen other vehicles, and other dealers, with a car and a deal you like. Make the dealer compete with hypothetical dealers. Ask questions. Be knowledgeable.
  2. Be mindful of your credit score. Every time a car dealer looks at your credit, it goes down. Remember this as you are shopping for a car. Usually, multiple credit checks in a short period hurt less than a check here or there.
  3. Do all you can to increase your score before you shop. If you know your credit isn’t the best, there are ways to build it, but it takes time. A secured credit card is a convenient credit product to get from your local bank. You have to put forward a security deposit of a minimum of $300, which becomes your credit limit. After a few months of having and using the card, and being diligent on payments, your credit score will slowly increase.
  4. Refinance when you are able. If you can get a car loan with low or no credit, your interest rate will be significantly higher than if you had a better credit score. Keep an eye on your credit score once you have bought the car. Once your credit score gets to a right place, or better, apply to refinance the loan with that lender or another one. You will end up with a better interest rate and may even have a lower monthly payment.
  5. Check your bank to see if it shows your credit score. If you have a bank account, some banks offer your FICO credit score as part of their online account perks. Check to see if your bank offers this, so you have an idea of what your credit score is before you shop for a car.
  6. Talk to your insurance company. When it comes to vehicles, the actual monthly price of the car is only one part of the equation. If you have picked out a few cars you are interested in, ask your car insurance company how your insurance would change if you bought either of them. Your car insurance may go up or down depending on the age of the vehicle, the perceived safety of the vehicle, and other factors.
  7. If you have a trade-in, appraise it. You do not have to take the dealer’s word for what your car is worth. Look at Kelley Blue Book at www.kbb.com or Carvana at www.carvana.com and research the value of your car as a trade-in. Print out the trade-in value so if the dealer tries to give you an amount that’s far less than what KBB or Carvana says it should be, show them your printed page. If you have to, sell your car to a private party.
  8. Find a reputable dealer. If you feel the dealer you are working with is shady or is otherwise not able to be trusted, you can always leave and find another dealer.

While it can be challenging to buy a car in Phoenix with little or no credit, it is possible. You have to be patient and dedicated finding the best deal for you.

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