When people do a Web search for bad credit car loans without having to put money down, they are hoping against hope that some vehicle dealer will let them drive off the lot with a hot car without requiring any type of cash or other value put forward by the buyer. That type of scenario is rare enough; it’s rarer still when the category of people with bad credit comes into play.
Unfortunately, we do not inhabit a fantasy world and, unfortunately, there is no such thing as a car loan for someone with bad credit and nothing to count as a down payment.
However, if we parse the terms a bit more carefully, we will see that bad credit car loans and no money down do, in fact, exist, but it depends entirely on your interpretation of “no money down.”
A shopper might not have any cash to place on someone’s desk as a down payment, but s/he must have something to count toward the value of the new car. If you don’t have $2,000 saved and have bad credit to boot, there are a couple of ways that you can get inside a new or used car, but you have to think creatively and be ready for tough terms on the loan that you will need.
How to engineer car loans with no money down
Here are the two best working ways to get a car loan without putting money down:
Trade in your vehicles
Car dealers are more eager than ever to sell vehicles, so they will accept your vehicle as a form of down payment, even if it is a clunker headed straight to the junk yard. Here is how creative car dealers pull this off:
- Imagine a person driving up in a true lemon, worth $100 max, yet wants to buy a car of $10,000.
- The car dealer will jack up the price of the car by $900 and the transaction goes like this: $10,000 car sells for $10,900, with the $100 car being valued at $1000 for the trade.
- In this way, the purchaser finances $9,900, the same as if s/he had been given only $100 for the car trade-in.
The lesson is that dealers have many interesting ways to get you into a new(er) vehicle.
Use the rebate on a vehicle as down payment
Some bad credit lenders will allow purchasers to turn around a new car rebate as part or all of the minimum down payment required. The rebate must be in the form of customer cash, however, not dealer cash. So, a $14,000 car with a $2,000 instant cash rebate can be purchased even if you have poor credit by using the instant rebate as the down payment on the vehicle.
Even while taking advantage of these two ingenious ways to work a bad credit car loan without a down payment, consumers need to be very leery of outrageous interest rates, long loan terms, pre-payment penalties and being talked into more vehicle than they can afford.
Go small, re-build your credit and financial standing, and work hard for the Mercedes many years down the road.