Don’t Have Enough for a Down Payment? Have Bad Credit? Your Dream of Owning a Car May Not Be Over

Jack recently graduated from university and landed his first out-of-school job across town. He’ll need a way to get there. As with most new graduates, Jack’s savings are not enough to qualify as a healthy down payment on a car and his credit score is less than stellar having racked up four years of debt. He wonders if he can afford or even qualify for an auto loan on such a tight budget and bad credit.

Is Jack’s dream of car ownership over?

Photo: Financial Post

This is an all-too-familiar scenario. However, it’s not just recent grads that face this problem. Due to various reasons such as home loans, debt, or simply not wanting to spend all their savings, many people from all walks of life don’t have enough in the bank to secure a down payment.

Still, a lack of savings may not necessarily mean the end of the road. While it is ideal to put down the recommended 20 percent, it is not a requirement with most dealerships, contrary to popular belief. This “magical” number often associated with auto loans is outdated and has struck fear in shoppers for much too long.

Many companies offer loans that are specifically designed to suit people with bad credit, no credit, can only afford to make low down payments, even those who have faced bankruptcy. Talk to your car dealership or talk to us at Auto Loans Solutions – we specialize in auto financing for credit challenged consumers and approve applicants simple and quick.

With that said, it is also necessary to prepare for less than ideal situations. Explore your newfound options but leave some wiggle room in your budget for unexpected costs. You should go in thinking that your current credit situation may hinder the chances to put zero down financing. It is also best to assume that you should put down a small down payment (anything you have saved towards the car will help). You may be pleasantly surprised when a down payment is not required.

Plan Ahead!

You’ve qualified for an auto loan! But, wait a minute. The numbers are higher than you expected and you’re not sure if you can make the payments easily. Before you come to the realization, factor in all monthly expenses beforehand to avoid a bubble bursting situation.

There are many things besides the price tag that should be considered before you set a budget for an auto loan. You will need to look at your records of present expenses as well as future ones, leaving room for any unforeseen costs.

Keep in mind that all vehicles are going to need fuel, auto insurance, parking, maintenance, etc. Don’t neglect to consider things such as rent, student loans, and variable expenses like utility costs when setting a budget.

Do you have a willing co-signer?

Now, in Jack’s case as a recent grad and a first-time vehicle buyer, he may want to ask his supportive and understanding parents to co-sign for the car loan. Having a co-signer allows young drivers to qualify for auto loans that may have not been available to them otherwise. And, of course, this will also assist in building a good credit history, which means you can one day be a sole signer.

Reality check!

Do you need a vehicle for basic and practical reasons such as getting you safely to and from work on a daily basis? Well, you probably won’t need a $50, 000 SUV which comfortably seats eight. And, while it is fun to visit cloud nine from time to time and dream of a luxury sports car hugging the curves of a road, or picking up a date in something shiny and impressive, it’s best to curb your excitement. You surely can’t expect a low financing or interest rate for a Ferrari!

Prepare a list of priorities that are suitable for your individual situation, keeping an open mind.

Things to think about:

Do you want to buy new or used? This is the fun part! Take your time browsing through inventory to get an idea of what you like.

What is the most important purpose of the car? Commuting? Work? Family?

Research vehicle safety features – newer cars are equipped with the latest technology and safety bonuses such as blind-spot monitoring systems, brake assist and are becoming more prevalent even on less expensive vehicles.

Research fuel cost – with the average person driving between 15,000 and 25,000 kilometres per year, your gas costs may get quite expensive. Talk to your dealer and find the right fit for you. 

It may be a huge disappointment to find that you can’t afford the car you want. However, buying something that suits your budget and saves your piggy bank from a tragic outcome is a sure way to gain the responsibility of making monthly fixed payments while having enough to put away in savings, not to mention repairing your credit as quickly as possible (this should really be an incentive to getting an auto loan!). This will be attractive to creditors who review your future car loan application (for when you’re ready for that dream car) because it will exemplify that you are ready and able to pay off a larger auto loan.

This doesn’t mean you will need to drive around in a car that resembles something out of The Flintstones. With dealer groups like The Humberview Group offering a wide-ranging selection of quality vehicles, finding one perfect for your unique requirements is quite possible.

Sometimes things happen in life that affects our credit in a negative way. We at Auto Loan Solutions understand that every person and every situation is unique. We truly believe everybody deserves a second chance.

Don’t wait to build your credit. Visit our page today and apply for your auto loan. When you are done with the application, one of our auto loan specialists will submit it for review, and then they will let you know if you have been approved!