Bad Credit? Here’s How to Get a Car Loan in 2025

Buying a car with bad credit can feel like an uphill battle, but it’s not impossible. With the right strategies and knowledge, you can navigate the car-buying process and secure a loan that works for you. In this blog, we’ll explore how to buy a car with bad credit in 2025, covering everything from improving your credit score to finding the right car and negotiating the best deal.

Understanding Bad Credit

What is Bad Credit?

Bad credit refers to a credit score that is below 620. This can result from missed payments, high debt levels, or other financial missteps. Lenders view borrowers with bad credit as higher risk, which can lead to higher interest rates and stricter loan terms. Understanding your credit score and how it impacts your ability to secure a loan is the first step in the car-buying process.

How Bad Credit Affects Car Loans

Having bad credit can make it challenging to secure a car loan with favorable terms. You may face higher interest rates, larger down payment requirements, and limited options of companies willing to offer you financing. However, there are ways to improve your chances of getting approved and finding a loan that fits your budget. It’s important to be aware of these challenges so you can prepare accordingly and explore all available options.

Improving Your Credit Score

Steps to Improve Your Credit

Improving your credit score can take time but is worth the effort for the benefits you will receive. Here are some steps you can take:

1. Make On-Time Payments: Ensure all your bills are paid on time, as payment history is a significant factor in your credit score. Late payments can have a substantial negative impact on your score.
2. Pay Down Debt: Reduce your credit card balances and other debts to lower your credit utilization ratio. Aim to keep your credit utilization below 30% of your total available credit.
3. Avoid New Credit Applications: Limit new credit inquiries, as each application can temporarily lower your score. Only get new credit lines when they are needed. Multiple inquiries in a short period can signal to lenders that you are in financial distress.
4. Check Your Credit Report: Review your credit report for errors and dispute any inaccuracies. You are entitled to a free credit report from each of the three major credit bureaus annually. Correcting errors can improve your score and ensure it accurately reflects your financial behavior.

Using Credit Improvement Tools

Consider using tools like Experian Boost, which can help improve your credit score by including utility and phone bill payments in your credit report. These tools can provide a quick boost to your score, especially if you have a limited credit history. Additionally, credit counseling services can offer personalized advice and strategies to improve your credit.

Finding a Car with Bad Credit

Where to Look

When you have bad credit, it’s essential to shop smart. Here are some places to consider:

1. Buy Here Pay Here (BHPH) Dealerships: These dealerships specialize in financing for buyers with bad credit. They offer in-house financing, which can be more flexible. BHPH dealerships often do not rely on traditional credit checks, making them a viable option for those with poor credit. However, be aware that interest rates may be higher.
2. Online Marketplaces: Platforms like Facebook Marketplace and Offer Up can be great places to find affordable used cars. These platforms allow you to connect directly with sellers, potentially saving money compared to dealership prices. Always inspect the car thoroughly and consider having a mechanic check it before purchasing.
3. Certified Pre-Owned Programs: Many manufacturers offer certified pre-owned programs that include warranties and financing options for buyers with bad credit. Brands like Toyota, Honda, and Ford have robust certified pre-owned programs.

Best Car Brands for Bad Credit

Some car brands offer special programs and incentives for buyers with bad credit. For example, Chrysler Capital offers subprime bonus cash for select Jeep and RAM models. Other brands like Nissan and Chevrolet also have financing options tailored to subprime buyers. Researching these programs can help you find a car that fits your budget and needs.

Getting a Cosigner

Benefits of a Cosigner

Having a cosigner most times improve your chances of getting approved for a car loan. Here are some benefits:

1. Better Interest Rates: A cosigner who has good credit can help you secure a lower interest rate. This can save you a substantial amount of money over the life of the loan.
2. Higher Loan Amounts: Lenders may be willing to offer a larger loan if you have a cosigner. This can give you more flexibility in choosing a car.
3. Improved Approval Chances: A cosigner can make you a more attractive borrower to lenders. This is especially helpful if your credit score is significantly below the lender’s minimum requirements.

Finding a Cosigner

Look for someone with a strong credit history and stable income. It’s essential to have a clear agreement with your cosigner about repayment responsibilities to avoid any misunderstandings. Family members or close friends are often willing to cosign, but ensure they understand the risks involved.

Shopping for a Car

Tips for Shopping

When shopping for a car with bad credit, keep these tips in mind:

1. Get Pre-Approved: Before you start shopping, get pre-approved for a loan to understand your budget and financing options. This can help you focus on cars within your price range and give you leverage in negotiations.
2. Choose Practical Models: opt for reliable and affordable models that fit your needs and budget. Consider factors such as all in pricing, maintenance costs, and resale value.
3. Negotiate: Don’t be afraid to negotiate the price and terms of the loan. Research the market value of the car and be prepared to walk away if the deal isn’t right. Use online tools like Kelley Blue Book to determine fair prices.

Using Online Platforms

Platforms like CarZing, Autotrader, TrueCar, and Cars.com offer tools to help you find the best deals on new and used cars. You can compare prices in your area, read real customer experiences, and even get pre-approved for financing. These platforms also provide detailed information about the car’s history and condition.

Making a Larger Down Payment

Benefits of a Larger Down Payment

If able to do putting down a larger down payment can help you in several ways:

1. Lower Monthly Payments: Reducing the initial loan amount can lower your monthly payments, by having less principal to finance. This can make your budget more manageable and reduce financial stress.
2. Reduced Interest Charges: A larger down payment can decrease the total interest paid over the life of the loan. This can save you money in the long run.
3. Improved Loan Approval Chances: Lenders may be more willing to approve your loan if you make a substantial down payment. This shows lenders that you are committed and financially responsible.

How Much to Put Down

It is always suggested that a buyer should be putting down at least 20% of the car’s purchase price. If you can afford more, it can further improve your loan terms and reduce your overall costs. Saving for a larger down payment may take time, but it can significantly benefit your financial situation.

Conclusion

Buying a car with bad credit in 2025 is challenging but achievable with the right approach. By improving your credit score, finding the right car, and negotiating favorable terms, you can secure a loan that fits your needs. Remember to explore all your options, including BHPH dealerships, online marketplaces, and certified pre-owned programs.