Planning

First, it’s important to know what you’re looking for, how much you’re willing to pay, and what options are available. Look at Consumer Reports, J.D. Power, or the Long-Term Quality Index to check the quality of specific car models. Also, speak to your local mechanic who could provide insights about what details to look for in a car and how you can spot a reliable vehicle.

To establish your budget, track the costs for your current car, including monthly payments, insurance, fuel, maintenance, repairs, and registration. This will help you know how much you can afford when buying a new car. The government provides a simple and free spreadsheet to help you make a budget from Consumer.gov. Knowing what you can afford with a pre-approved loan can also help you narrow down your options.

After deciding on a car and budget, you can then research available offers. It’s a good idea to research prices online and even request price quotes from different dealers to get a baseline of what is available in the marketplace.

Negotiation

Now that you have a plan in place, the next step is negotiation. Before walking into a dealership, write down your targeted down payment and monthly payment expense. Then, write down the absolute highest amount you can afford. Keep these numbers in mind and do not share them (especially your absolute highest amount) with the salesperson. These numbers will be your anchors during the negotiation and will allow you to stay confident and make clear decisions under pressure.

Your research from planning could help control the conversation regarding the pricing of a car. It could also give you a better understanding of the different price points for various options or add-ons, which can aid in your negotiation. Additionally, the quotes you may have received from other sellers could let the dealership know there is competition for your business.

As you negotiate, try to keep your emotions in check and be ready to leave if you feel pressured or if the pricing doesn’t line up with your research and budget. You may also be able to increase your leverage if you already have financing in place. This could remove the opportunity for the dealership to “play around” with the numbers and squeeze more money out of the deal by offering a lower monthly payment over a longer-term. The dealership won’t have as much wiggle room to take advantage of you.

Closing the Deal

At the end of the day, both you and the seller are trying to get a deal done. The seller is trying to not lose money on the car, and you’re trying to pay as little as possible. Going into the dealership with a plan, and having your financing in place are great steps toward helping you negotiate and ultimately close a deal for the car you want.

Once an agreement has been reached on price, paperwork needs to be completed so the deal can be finalized. Before signing anything, it’s imperative that you read each document, paying close attention to ensure all of the numbers and terms match the deal you agreed upon.

The first thing you will want to do is assess the exterior of the vehicle to determine if it’s in good condition. Make sure you don’t find any kind of structural damage that could affect the vehicle’s performance.  Even if you’re somewhat inexperienced with cars and auto repairs, it’s important to do a basic inspection:

• Listen for any abnormal sounds during a test drive.
• Carefully examine the paint job for signs someone may have painted over rust.
• Check the headlights and floorboards for signs of moisture, which could indicate the car has been in a flood.

Check the Engine and Tires

If it’s possible, have a qualified mechanic check the engine of the used car to make sure you’re not buying a lemon. If a seller is skeptical about letting a mechanic look at the vehicle, this could potentially be a red flag. A car that needs an engine replaced could ultimately cost you more in time and money than it’s worth.

Tires are also important to check and can more easily be inspected without a mechanic. If the tread on the tires is excessively worn down, you may need to spend money to purchase a new set, which could set you back hundreds of dollars.

Find Out About Spare Parts

With a used car, expect that some of its parts eventually need to be replaced simply through normal wear and tear. It’s therefore important that you’re able to find these parts on the market. Try to opt for a vehicle that has accessible spare parts that are easily replaceable when necessary.

Check the Vehicle’s Records and Documents

Every car has a unique Vehicle Identification Number (VIN) that can help you find out about its history. Online services, such as CARFAX, use the VIN to give you a detailed report on the car’s records. This could let you know if a car has been totaled or how many times it has been in a collision.

Also be on the lookout for cars with “salvage titles,” meaning they were previously totaled in an accident, fire, or flood. Although repaired, these cars might still have hidden issues that have gone unnoticed. Check the full vehicle history report, if available, along with any service records, so you know exactly what you’re getting when you buy a used car. Finally, to the fullest extent possible, verify the validity of the vehicle’s documents before finalizing any purchase. If the car is from a dealership and labeled as “certified pre-owned,” make sure any guarantees are in writing, and also make sure you know what may be covered under any warranties.

Keep these tips in mind for your next used auto purchase. A little bit of due diligence and thorough inspection could go a long way toward saving you money on maintenance costs in the future.

Before applying for an auto loan, it’s important to check both your credit score and credit report. Each of the three major credit-reporting agencies will provide you with one free report per year. If you find any errors on your credit report, try getting them fixed as soon as possible. Paying off the balances of any past-due accounts would also be recommended. Fixing your credit report in these ways could increase your credit score and credit trustworthiness, and help you secure a more competitive rate on a loan.

Try to Get Pre-Approved

Bad credit can make shopping for a car exasperating, especially when you find what you want, and then lenders are simply unwilling to extend you a loan. By talking to your bank or credit union, you may be able to get pre-approved for a specified amount. This will help you know your budget without the uncertainty of being rejected for credit reasons.

Make a Larger Down Payment

Having poor credit unfortunately means that the amount of the car loan available to you will likely be limited. Additionally, you will probably also be faced with a higher interest rate if you’re approved. If you can afford to make a larger down payment, however, you could lower the loan amount and perhaps negotiate a lower rate as a result.

Skip the Extra Features

If you’re buying a car with bad credit, you have to be realistic about the features you want versus those that you actually need. By reducing the number of extra features—those that aren’t absolutely essential (i.e., leather seating; high quality sound system, sport rims, etc.)—you can help lower the total price of the car and, likewise, the loan needed to pay for it. Lowering the amount of the loan you request will not only make it easier to repay on time, but it might also increase your likelihood of approval.

Apply for Assistance

There may be nonprofit agencies or government programs that provide auto loans to low-income consumers. These vary depending on your state, so it’s best to check to see what may be available. For example, in California, the statewide Clean Vehicle Assistance Program provides personal grants and affordable financing to help lower-income Californians purchase a used or new conventional hybrid, plug-in hybrid or battery-electric car.

Keep these tips in mind if you’re looking to purchase a car and your credit score isn’t as high as it could be. Although difficult, finding a loan with bad credit is not impossible—it just may take more effort and planning.