How to Buy a Used Car With Bad Credit in Nashville
Having bad credit doesn’t necessarily mean you can’t buy a dependable used car. Nashville and Middle Tennessee shoppers may have several financing options available, including banks, credit unions, dealership financing, and Buy Here Pay Here programs.
The key is to understand your credit situation, know what you can realistically afford, and compare the total cost of financing rather than simply looking for someone who will approve you.
Here’s how to approach buying a used car when your credit isn’t perfect.
Check Your Credit Before You Start Shopping
Before visiting dealerships, review your credit reports so you have an idea of what lenders may see.
Look for information that may be inaccurate and pay attention to outstanding balances, late payments, collections, and other items affecting your credit.
Knowing where you stand can also help you evaluate financing offers more confidently.
Decide What You Can Actually Afford
Getting approved for a vehicle doesn’t necessarily mean the payment fits comfortably into your budget.
Consider your regular expenses along with the costs of owning the vehicle, including:
- Car payment
- Auto insurance
- Fuel
- Maintenance
- Tires
- Registration
- Unexpected repairs
Set a realistic budget before you start looking at vehicles.
Save for a Down Payment
A down payment reduces the amount you need to finance.
Depending on the lender and your credit situation, a larger down payment may also improve your financing options.
However, don’t empty your emergency savings just to make a larger down payment. A used vehicle can need maintenance or repairs after purchase, and having some money available for unexpected expenses is valuable.
Consider Getting Preapproved
Before relying exclusively on dealership financing, consider checking with a bank or credit union.
A preapproval can give you an idea of the interest rate and financing terms you may qualify for before you negotiate the vehicle purchase.
Even if you ultimately use dealership financing, having another offer gives you something to compare it against.
Compare More Than the Interest Rate
The interest rate matters, but it isn’t the only number you should consider.
Compare:
- Vehicle selling price
- Down payment
- Amount financed
- Interest rate
- Loan term
- Finance charge
- Payment amount
- Number of payments
- Total amount you will pay
A loan with a lower monthly payment isn’t automatically a better deal if it requires substantially more payments.
Don’t Focus Only on the Monthly Payment
One of the easiest ways to make a vehicle appear affordable is to extend the financing over a longer period.
That can reduce the monthly payment while increasing the total amount you pay.
Instead of asking only:
“What will my payment be?”
Also ask:
“What is the total amount I will pay for this vehicle?”
That question can give you a much clearer picture of the transaction.
Understand Buy Here Pay Here Financing
Some Nashville-area shoppers with credit challenges may consider a Buy Here Pay Here dealership.
These dealerships may provide financing directly or through an affiliated financing program rather than relying entirely on a traditional third-party auto lender.
This can provide another financing option for some shoppers, but programs and requirements vary considerably by dealership.
Before purchasing, understand the complete financing agreement.
Questions to Ask a Buy Here Pay Here Dealer
If you’re considering Buy Here Pay Here financing, ask:
- How much is the down payment?
- What is the vehicle’s selling price?
- What are the interest rate or finance charges?
- How often are payments due?
- How many payments will I make?
- What is the total amount I will pay?
- Are there late fees?
- Is there a grace period?
- Is payment activity reported to credit bureaus?
- Is there a warranty?
- Are there optional products included in the financing?
- Does the vehicle have a GPS or starter-interrupt device?
Make sure important terms are included in the written agreement.
Ask Whether Payments Are Reported to Credit Bureaus
If improving your credit is important to you, ask whether the lender or dealership reports your payment history to any of the major credit bureaus.
Policies vary.
Don’t assume that making payments on an auto account will automatically help build your credit unless the account is actually reported.
Don’t Let Credit Problems Distract You From the Vehicle
Financing approval can feel like the biggest hurdle when you have credit problems, but you’re still buying a used vehicle.
Inspect it just as carefully as any other car.
Check the:
- Tires
- Brakes
- Air conditioning
- Electronics
- Dashboard warning lights
- Interior
- Exterior
- Fluid leaks
- Vehicle history
- Mileage
Take a thorough test drive before making a decision.
Consider a Pre-Purchase Inspection
When possible, have an independent mechanic inspect the vehicle before you purchase it.
A mechanic may identify worn components, leaks, previous repairs, or mechanical problems that aren’t obvious during a short test drive.
An approval for financing doesn’t guarantee that the vehicle is mechanically sound.
Check the Vehicle History
Ask for the VIN and review available vehicle-history information.
Look for reported accidents, title issues, mileage inconsistencies, and other information that may help you evaluate the vehicle.
A vehicle-history report isn’t a substitute for a mechanical inspection, but the two can work together to give you a better picture of the vehicle.
Be Careful About Adding Extras to the Loan
During the purchase process, you may be offered products such as:
- Extended service contracts
- GAP coverage
- Tire-and-wheel protection
- Roadside assistance
- Appearance-protection products
Some products may be useful depending on your circumstances, but they also increase the amount you’re paying.
Ask for the actual price of each product, not simply how much it changes your payment.
Compare the Out-the-Door Price
When comparing vehicles at different dealerships, ask for the out-the-door price.
This generally gives you a better picture of the transaction because it includes more than the advertised vehicle price.
Review the vehicle price, taxes, dealer charges, title and registration costs, and optional products before considering the financing.
Then evaluate the financing separately.
Avoid Making a Decision Just Because You’re Approved
Getting approved can be exciting if you’ve previously had trouble obtaining financing.
But approval alone doesn’t make a vehicle a good purchase.
Ask yourself:
Is this the right vehicle?
Is the price reasonable?
Can I comfortably afford the payment?
Do I understand the financing?
What will I pay in total?
You can still walk away from an offer that doesn’t work for you.
Can a Car Loan Help Rebuild Your Credit?
An auto loan may help establish positive payment history if the account is reported to credit bureaus and payments are made as agreed.
But buying a more expensive vehicle solely to try to improve your credit may create unnecessary financial risk.
Choose a vehicle and financing arrangement you can realistically afford.
Take Your Time and Compare Your Options
Credit challenges can limit your choices, but that doesn’t mean you should rush.
Nashville and Middle Tennessee have many used-car dealerships and different types of financing programs.
Compare several options when possible. Even a small difference in vehicle price or financing terms can become significant over the life of the agreement.
Find Used Car Dealers in Nashville & Middle Tennessee
Shop Nashville Used Cars helps local shoppers find used-car dealerships throughout Nashville and Middle Tennessee.
Browse dealerships by city, explore Buy Here Pay Here dealers, and compare your options before deciding where to purchase your next vehicle.