How to buy a car when you don't have perfect credit

Lisa Copeland

A good credit score will always help you qualify for the best interest rates when you are car shopping. But, if you don’t have perfect credit, how can you get the best deal possible on your next car purchase?

Lisa Copeland, a pioneer in the field of automotive management for more than 25 years and Managing Partner of Fiat of Austin, the top Fiat retailer in North America since the brand’s return, says you can have a blemished credit report and still manage to buy a car at the best interest rate and at the best price.

Copeland offers these tips for buying a car when you don’t have perfect credit:

  • Pre-shop your credit report. There are many free sites for you to use (such as www.annualcreditreport.com) so that you can make sure you walk into a car dealership as knowledgeable and prepared as possible.
  • Check with your local credit union before the car dealership. If your credit score is less than 660, many times the local credit unions have more discretionary power than car dealerships and can overlook minor blips on your credit report.
  • Stay within your budget. Don't let the car dealer talk you into a car that is above the maximum budget you set for yourself as that could be what got you into credit trouble in the first place.
  • Save money for a down payment. Twenty percent down is desired by most banks if your credit is below a 620 FICO to receive a fair interest rate.
  • Consider a co-signer. Check with relatives before you go car shopping to see if they would be willing to co-sign with you. That could help your bargaining power.
  • Bring important documents with you to the car dealer. When it is time to discuss financing, the dealership wants to see proof of who you are, that you have a job and that you have a history of making monthly payments on time. Bring the most recent pay stub from your employer, a utility bill (gas, water, power), your driver’s license and at least three personal references.
  • Make timely payments. After you have made 12 consecutive on-time payments, it is possible to refinance your loan and possibly receive a lower rate – which can start you on your way to a better credit history.