Strategies to follow when buying a car with terrible credit

Strategies to follow when buying a car with terrible credit

Posted on July 19, 2022

It can happen to anyone of us, we fall behind on our financial obligations, and before you know it, your credit has gone from good to downright terrible.

If you find yourself in a situation where you need to buy a car and have terrible credit, these suggestions from our Hannon auto loans team are going to help you get the best possible car for your buck.

Taking stock of your financial situation

Before you can rebuild your credit, you must first establish a baseline and understand what the root cause of the financial hardship is.

Did you lose your job during the pandemic? Or perhaps there was a relationship breakdown?

Every situation is unique, but once you understand the root cause of your financial problems, you will be able to explain them to prospective lenders.

Another benefit of identifying the root causes of your financial challenges is you can put into place contingency plans, so the odds of you going through the same issues are greatly reduced.

Budgeting for your vehicle purchase

Vehicle prices have gone up in the last couple of years; whether you are buying an EV, hybrid, or internal combustion engine (ICE), if you are buying a brand-new car, it is going to set you back $30k -$40k minimum.

If your budget is tight and you don't want to make such a significant financial commitment, you should consider going with a previously owned vehicle.

We have all heard horror stories about how a person bought the used car from hell, and while there are risks associated with buying a used car, if you go through a dealership that is licensed and has been in business for a considerable number of years, those risks are greatly reduced.

Budgeting for the purchase of your new car

Since you have credit issues, lenders are going to tack on higher interest rates to help offset the added perceived risk. With Canada's prime interest rate tracking the highest in decades, you can expect to pay an added premium.

One of the best ways you can increase your chances of getting a good deal is by going through a local car dealership.

The dealership will be able to shop around Canada and find the lenders that are going to give you the most competitive terms.

Since the dealerships have a tremendous amount of experience with negotiating financing terms, they will be able to make the strongest possible case on why you deserve a good deal.

While the dealership is able to help you, there are some things you can do today to help make your life financially better. If you don't already have a budget in place, you should create one.

Inflation has crept into every facet of our lives, and if you don't budget properly, you could easily fall back into debt.

The sooner you begin taking control of your finances, the happier you are going to be, so why not get started? It will be the best decision you made this year.

When you’re ready for a car lease or loan, get in touch with the Hannon auto loan experts at Northway Ford for great deals on auto finance.