Many consumers have had previous repossessions in their past and they have thought about how to finance a car after it happens. Of course, everyone’s situation is different ranging from job loss, not caring about payments, or the needed expensive work that was not worth keeping the car. Whatever the situation, consumers must realize that there is hope. There are a few banks willing to give a second chance to consumers. But there are terms that come along with that. Here is what to expect.
1. Understand That You Will Have A 18-30% Interest Rate
After being in the automotive industry for over 4 years, I don’t know why
consumers think they would get a low or single interest rate. You see when you have a car repossessed, many financial institutions won’t take a chance on you. The few banks that are willing to finance you will give you a double digit interest rate between 18%-30% depending which state you live in.
Most consumers tend to worry about this high interest rate, but don’t worry as there is a solution! You see, these auto loans are not made to keep for the entire term. If you have a high interest loan, you only want to keep it for 50% – 70% of the term. With normal driving miles per month and normal wear and tear, you may break even with your car being worth what you owe.
2. Understand That You Will Have To Make A Down Payment
Yes, Yes I know. Why must you have to make a down payment? It is really quite simple actually. Anytime you have many late or missed payments, the bank would like to see a commitment from the buyer so that they finance less. Especially with a previous repossession, there is a 90% chance that the bank will require one to approve you for the loan. How much will you have to put down? It really depends on the financial institution. A good rule of thumb is around $1000-$1500. Keep in mind, with bad credit, it is best to stick with a car of $15K and under. The smaller the car, the smaller the down payment and monthly payment.
3. You Are Not Marrying The Car You Finance
In some cases, you will get approved for a car that you may not fall in love with and that is okay. Since you are not marrying the car you finance and keeping it forever, its best to keep your options open and not to be too picky. Normally with bad credit, there will be a compromise. It will either be on the monthly payment, the down payment, or the car itself. Don’t be surprised if you change your mind on the color or maybe even some equipment. The most important thing to remember is the fact that you were able to get approved and to set a goal to make all of the payments on time.
The Bottom Line
By now, you can see how consumers can finance another car after a previous repossession. There are many finance companies that are willing to give consumers a second chance but they must know how to qualify and how to take advantage. Hopefully this article helps you or someone you know. Be sure to share this article with someone you know that can benefit from the information provided.