SANTA MONICA, Calif., April 30, 2014 /PRNewswire/ -- It's possible to buy a new car with bad credit if you know where to look and how to prepare, says Edmunds.com, the premier destination for car shopping.In fact, says Edmunds.com, the right approach to financing a new car can help subprime car buyers get their credit back on the right track.
"Contrary to popular belief, there are a number of reasons why a lender would help somebody with a troubled credit history to buy a new car," says Edmunds.com Consumer Advice Editor Ronald Montoya. "If you do your credit homework, shop within your price range and make all of your payments, you'll not only improve your credit score but you'll also practice positive finance habits that will serve you well for years to come."
Edmunds.com outlines four specific tips that you should follow if you're a subprime car shopper and you'd like to buy a new car:
Run your credit report. AnnualCreditReport.com offers one free report per year from each of the major credit reporting companies. The report will help you identify "risk factors" in your history—such as old debts and unpaid fines—so that you can fix them. Edmunds.com recommends taking this step at least three months before you plan to buy so that you can take action on any outstanding items before engaging with the dealership and other lenders.
Get pre-approved for a loan. If your credit is bad, you can expect to pay a high interest rate on your loan. But that doesn't mean you shouldn't shop around for the best possible rates. And be sure to check with your own bank or credit union; it may be more willing to approve you if you already have an existing financial relationship.
Show that you're a good credit risk. When you apply for financing—especially at a dealership—bring proof of improved financial stability. These items may include a recent pay stub, a utility bill and a list of personal references.
Stay well within your price range. Just because you qualified to buy a $22,000 midsize sedan doesn't mean you should buy it. For example, if you scale back and purchase a $17,000 compact sedan, you'll free up $100 per month. This is money you could use for gas, insurance or other bills.
The segment of buyers with less-than-stellar credit makes up a growing chunk of the automotive market. According to credit monitor Experian, nonprime, subprime and deep-subprime buyers accounted for 34.1 percent of all new auto loans in the fourth quarter of 2013, up from 32.8 percent in Q4 2012.
About Edmunds.com, Inc. Edmunds.com is a car-shopping Web site driven to make car buying easy. Almost 18 million visitors use our shopping tools every month to connect with over 9,500 dealer franchises across the U.S. Shoppers can browse our inventory listings for available cars and trucks, and with Edmunds.com Price Promise®, they can get an instant, upfront price on those same vehicles. Recently named by Maritz Research as one of the most trusted online consumer review sites—and the only automotive site listed in the top ten—Edmunds.com is also home to comprehensive car reviews, shopping tips, photos, videos and feature stories. Even when you're at the dealership, we're always by your side. Just call our free Live Advice Line at 1-855-782-4711 or use our acclaimed Edmunds.com iPhone and iPad apps or Edmunds.com Android App. We're based in Santa Monica, Calif., but you can connect with us from anywhere by following @Edmunds on Twitter or by becoming a fan of Edmunds.com on Facebook. You can also find us on Instagram, Google+, Pinterest, LinkedIn and Flipboard.