Bad Credit Dealer Financing
According to Todd Kutcher, chief operating officer of Credit.com, if an applicant’s credit score is below 550, lenders will often auto-reject his or her application. In this case, dealers are the best alternative because they have much more flexibility from a financing standpoint.
How Dealer Financing Works
Dealers have access to “captive finance companies” — lenders operated by auto manufacturers themselves — as well as other private lenders. When you see super low interest offers in car advertisements, these lenders are often the ones setting the financial groundwork, and they often specialize in higher-risk loans, like those given to consumers with bad credit. After all, their number one priority is to help dealerships and manufacturers sell more vehicles, and 30-35% of American consumers now suffer from bad credit histories.
Example Captive Finance Companies
Mazda = Mazda American Credit
GM dealers = General Motors Acceptance Corporation
Nissan = Nissan Motor Acceptance Corporation
How Low Will They Go, Credit-Wise?
Unfortunately, captive finance companies do not often publish the minimum credit cutoff point. In all probability, this threshold is a liquid one, based both on need and other, non-credit factors in an applicant’s profile such as employment history, income, and value of any collateral property pledged to secure the loan. That said, representatives of various captive financers have stated time and again that they are willing to finance much more liberally than banks.