In urgent need of a car, but can’t buy one because of budget restraints or that costly down payment? Most auto dealers will offer you this solution—pay straight out of your pocket in one shot, including the sky-high interest rates of 12% to 22%. The alternative sounds unreasonable, we know, but it doesn’t have to be: here are some tips to get yourself a car, no down payments required.
Main pointers to getting that auto you need:
- Find a way to boost your credit score. If you are intending to sponsor your own car purchase, this will increase your chances of getting more generous loan terms from the bank.
- Look for someone to co-sign for you. This might help increase the amount of principal you receive, enabling you to get a car that requires a down payment.
- Rather than just sticking to one dealer, try looking for other various lenders and dealers to get familiar with current prices and terms. Ensuring that you can get a good and reasonable deal is just as important as obtaining the finances for it.
- It’s always wiser to opt for a down payment, even if it’s a small one. Patience rewards those who wait, so try to save up some cash before you make your purchase.
How to increase your credit score
If you’re wondering who gets to enjoy lower interest rates from the bank, it’s those who are securely employed, earn a stable income, live in one place for a year or more and whose credit records reflect their ability to pay their loans are usually the ones who do. Those with credit scores of 680 or more are often most able to convince lenders to waive off your down payment, with no increase in your interest rate at all. If your credit score is in a lower range of 580 to 669, your loan will drop to a subprime arrangement that also offers a waived down payment, but a higher interest rate. For scores of 580 and below, these often stand little to no chances of getting any loan agreements at all.
Before taking measures to boost your credit score, you can first neaten your credit report by doing a quick scan of its accuracy. After that, make sure that your bills are paid by their due dates and try your best to clear any debts or leftover credit card balances. If you can’t, then try to keep your debts at nothing above 25%-30%.
Look for a co-signer
If you want to avoid the down payment that comes with the car purchase, one way is to get a close friend or family member with a high credit score to cosign the purchase agreement with you. But bear in mind that in cosigning, lenders may notice that you, with the lower credit score, are the one financing the purchase. As such, the dealer may offer you an annual percentage rate (APR) that ranges from the median category, which may result in a lower waiver to your interest rate.
Remember to exercise responsibility when you opt to look for a cosigner. Even though you’re the one paying off the loan, both of you will be liable in ensuring that payments are consistently made on time. Should you exceed the due date of your payment or fall into the habit of doing so, then both you and your cosigner will get a reduction to your credit scores. Furthermore, cosigners can sometimes feel that they have ownership of the car, although this is clearly a mistaken concept. Cosigning can be complicated with emotions, so remember to keep clear, organized records to avoid future conflicts and be consistent in your repayments.
Explore your options
Automobile loans range very widely, so it’s definitely worth your time to do your research and shop from a variety of options. Look into car dealerships, nearby credit unions, banks or even alternative loan agencies. Go online and look into the latest car loan rates and keep an eye out for online lenders that specially offer car loans with both low rates and no required down payment. Lastly, ensure that you are well informed of the current trend of loan rates in order to avoid being deceived by car dealers. Given the competitive culture amongst car dealers, showing that you know what the current rates are (and that you could potentially leave to get a deal elsewhere) will quickly get them to make a negotiation that’s more aligned with your terms.
Opt for the down payment
Of course, the reason you’re here is that you want to find out how to get a car without the down payment, as the article says. But to be fair, it really is better to save a bit of money before you make your car purchase. Consider this: should you want to sell the car in the future, the chances of the resale price remaining as its original value is low. Given that a car’s value declines fast, you might go into some heavy debt if the outstanding loan exceeds the car’s resale price.
Though it might feel burdensome, opting for a down payment might not be as bad as you think it is. Recently, dealers have shown more flexibility and have moved away from the usual rates of 20% in down payment. Based on the Kelley Blue Book, the down payment quoted by car dealers range from 9% – 12%. Furthermore, in 2019 rising car prices allowed purchasers to make an average of 11.7% in down payments. Although it’s better to have more cash at your disposal, any amount of down payment will still be beneficial because it reduces your principal loan and interest rate.
If possible, exercise a little patience and set aside a few months to save up for the down payment. This additional time can also give a boost to your credit score, making you eligible for better loan terms.
Yes, getting a car with no down payment sounds a lot less burdensome, but remember that there is always a risk of getting charged with a higher interest rate. If anything, there is always the cheaper option of second-hand cars or doing a trade-in with your current vehicle if it’s still in good condition (you get lower rates too). What’s more, there are plenty of car title loans online for you to browse and pick from. At the end of the day, stick to a car title loan online that don’t extend beyond six or seven years and avoid credit life insurance and extensions in warranty as these could increase your debt.