You can get a car with bad credit by working with subprime lenders, credit unions, buy here pay here dealerships, or by using a cosigner to strengthen your application. Expect higher interest rates—subprime borrowers (501-600 credit score) currently pay 13-19% APR versus 6-7% for prime borrowers[1]. A larger down payment (10-20% of the vehicle price) significantly improves approval odds and can lower your rate[2]. Bad credit doesn't mean no car—it means more legwork and higher costs, but financing is absolutely possible.
Credit scores below 600 fall into subprime territory for auto lending[3]. Here's how lenders typically classify borrowers:
| Credit Score Range | Category | Typical New Car APR | Typical Used Car APR |
|---|---|---|---|
| 781-850 | Super prime | 5.25% | 7.13% |
| 661-780 | Prime | 6.87% | 9.36% |
| 601-660 | Near prime | 9.83% | 13.92% |
| 501-600 | Subprime | 13.18% | 18.86% |
| 300-500 | Deep subprime | 15.77% | 21.55% |
Source: Experian Q2 2024 data[1]
The rate difference is substantial. A subprime borrower financing a $25,000 used car at 18.86% pays roughly $536/month over 66 months—compared to $518/month for a prime borrower at 9.36%[1]. That seemingly small monthly gap adds up to thousands over the loan's life.
Several mainstream lenders specialize in or accept subprime borrowers[3][4]:
The advantage of these lenders? They report to credit bureaus. Every on-time payment helps rebuild your score, potentially qualifying you to refinance at a better rate later.
Credit unions often outperform banks for bad credit auto loans because they're member-owned nonprofits rather than profit-driven institutions[5][6].
Benefits include:
The catch? You typically need to become a member before applying. Many credit unions have simple membership requirements—living in a certain area or working for specific employers. Some have open membership to anyone who joins with a small deposit.
If you're considering multiple financing options, understanding whether you need good credit to lease a car helps you compare leasing versus buying.
Buy here pay here (BHPH) lots finance vehicles directly without involving outside lenders[7]. They exist specifically for buyers who can't get approved anywhere else.
| Pros | Cons |
|---|---|
| Approval for almost any credit situation | Higher interest rates (often 15-25%+) |
| Fast, same-day financing | Limited vehicle selection |
| No third-party approval needed | May not report to credit bureaus |
| Flexible payment schedules | Older, higher-mileage vehicles |
The biggest risk with BHPH? Many don't report your payments to credit bureaus, so you won't rebuild credit even with perfect payments[8]. Always ask upfront whether they report to Equifax, Experian, and TransUnion. If they don't, you're paying high interest with no credit-building benefit.
Some automakers offer programs specifically for credit-challenged buyers[3]. These programs often have restrictions—specific models only, shorter terms, or higher rates—but they provide another path to approval.
Check with:
Manufacturer programs typically do report to credit bureaus, making them preferable to non-reporting BHPH lots if you qualify.
Most subprime lenders require 10-20% down, or at least $1,000—whichever is greater[2].
A bigger down payment helps in multiple ways:
If you're buying a $15,000 car with bad credit, expect to need $1,500-3,000 upfront. For a $25,000 vehicle, that jumps to $2,500-5,000.
A cosigner with good credit can dramatically improve your terms[9][10].
When you add a cosigner, lenders consider both credit profiles. If your cosigner has a 720 score while yours sits at 550, you might qualify for near-prime rates instead of deep subprime. That could mean 10% APR instead of 20%—saving thousands over the loan term.
But cosigning is serious business. If you default, your cosigner's credit takes the hit, and they become legally responsible for the debt. Only ask someone who trusts you and understands the risk.
Before applying anywhere, pull your credit reports from all three bureaus[3]. Look for:
Disputing errors can take 30-45 days but might boost your score enough to move from deep subprime to subprime—or subprime to near prime. Even a 30-point improvement changes your rate significantly.
Prequalification lets you see potential rates and terms without a hard credit inquiry[3][4]. Soft inquiries don't affect your score, so you can shop around freely.
Once you narrow down your options, submit full applications within a 14-day window. Credit bureaus treat multiple auto loan inquiries in a short period as a single inquiry, minimizing the impact on your score.
Lenders approve loans more readily when the requested amount is lower[6]. A $12,000 used car is easier to finance with bad credit than a $30,000 new one.
Buying a reliable used vehicle now, making payments on time for 12-24 months, and refinancing or trading up once your credit improves is often smarter than stretching for something expensive with terrible terms.
Prepare these items before visiting dealers or applying online:
Subprime lenders often require more documentation than prime lenders because they're taking on more risk.
Bad credit loans typically come with[1]:
Some lenders won't finance vehicles over 100,000 miles or more than 10 years old. This limits your options but also protects you from buying a money pit.
Make 12-24 months of on-time payments and your credit score will likely improve enough to refinance at a better rate[8]. Some buyers treat their initial high-rate loan as temporary—a bridge to better terms once they've proven reliability.
If you're building credit from scratch, knowing how many miles is good for a used car helps you choose a vehicle that will last through your credit rebuilding period.
Dealers love to negotiate monthly payments rather than total loan cost. A lower payment often means a longer term, which means more interest paid overall[3].
Example: A $20,000 loan at 15% APR:
The 72-month option looks easier monthly but costs $3,274 more in interest.
Walking into a dealership without preapproval puts you at a disadvantage[3]. The dealer controls the narrative and may push you toward their highest-margin financing option.
Get preapproved from a bank, credit union, or online lender first. You'll know exactly what you qualify for and can compare dealer financing against your existing offer.
A cheap car with expensive insurance, poor fuel economy, and constant repairs might cost more than a slightly pricier reliable vehicle. Consider:
Your first approval isn't necessarily your best option. Shop around—even with bad credit, rates vary significantly between lenders[4].
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