What mistakes should I avoid when buying my first used car with bad credit and a tight budget?
Posted by Emotional_Bar_2573@reddit | askcarguys | View on Reddit | 21 comments
Hey guys, I'm trying to buy my first car and honestly a bit confused. My budget is low and my credit isn't great, so I've been looking at used cars from smaller dealership that buy here pay here financing.
I actually got approved pretty quickly, which felt a little too easy tbh. They're mostly talking in terms of monthly payments, which look double, but I'm worried I might be missing something important like the total cost, interest rate, or hidden fees.
What are the biggest mistakes people in my situation usually make? Any advice would really help.
Gunk_Olgidar@reddit
Get an E-bike.
You cannot afford a car.
Emotional_Bar_2573@reddit (OP)
Yeah. This is the harsh truth more people need to hear.
jrileyy229@reddit
They want to talk in monthly payment so you don't realize you're paying 27% interest and the 5k dollar car is going to cost you 12k by time you're done.
If you don't immediately know the interest rate, the total cost, and what every additional fee is, then you're correct... You're making a huge mistake from the start.
Before you sign anything, you should fully understand every single sentence in it.
Many people will tell you that buy here pay here are crooks because of these crazy interest rates... But they have crazy amounts of risk when dealing with people with bad credit. They have to make enough on half the cars to cover the other half that disappear. When people know their car is about to be repossessed, they will go park it behind uncle Bob's shed and hide it
Emotional_Bar_2573@reddit (OP)
Probably one of the most realistic explanations of how people end up trapped in bad car loans.
UsefulCollection5038@reddit
You don't need a car if you cant pay for it in cash. Are you going to sink in payments and pay for maintenance? Any public transit in your area?
mpython1701@reddit
But an e-bike or moped. Save your money and pay cash for your first car. Can still do okay with $6-8k.
Ok-Professional-2979@reddit
Shop around for pre-approval before going to the dealership.
Aaronator20@reddit
Buy here pay here places
outthe_door@reddit
If your credit score is low there's a good chance you'll still get approved but it's going to come with a high interest rate and a long loan term — think 60 to 72 months. The monthly payment might look fine on paper but that's the problem. A long loan at a high rate means you're paying a lot more for that car than the sticker price and you could easily end up owing more than it's worth if you ever need to sell or trade it in early.
Before you commit to anything make sure you look at the total cost of the loan not just the monthly payment. That number tells you the real story.
Honestly if the credit score is the issue it might be worth taking some time to improve it before buying. Going from a 580 to even a 650 can make a significant difference in the rate you qualify for and that translates to real savings over the life of the loan.
HyenaFew3903@reddit
Do not buy car on looks buy a car on its performance
Waste-Beginning-6150@reddit
If you’re going to finance, shop around for rates. I’ve had luck with reputable credit unions (there are predatory ones out there) that gave me half the rates other places wanted to give me.
-LostInOrbit-@reddit
Dude look up an auto loan calculator and fill it out. Put in your principal, interest rate and down payment/loan term and see how its supposed to shake out. They can rot with the focus on solely monthly payments, out the door (OTD) price matters far more and monthly payments are influenced by interest rate and length of the loan.
Emotional_Bar_2573@reddit (OP)
Appreciate the reality check honestly. I'm gonna start asking for the full OTD price from now on.
-LostInOrbit-@reddit
I just don't want you getting screwed man, you deserve that much at least. Don't let those sales douches get you!
Fun_Boss_2112@reddit
BHPH is the worst possible way to buy a car.
LOGGATO@reddit
Financing is going to screw you. plain and simple. then you are stuck in a cycle of never-ending debt. I cant ever look at a loan again without seeing how much total is paid in interest. most peoples total interest alone can buy pretty nice cars!
The happiest I've ever felt was getting out of my car loans. (i've had a few over the years). It's very freeing knowing your money is going 100% to where you want it to go.
Complete-Can3957@reddit
Hi there, I once had a summer job working at a greasy used car dealership that preyed on people in situations such as yourself.
The majority of the client base of this dealership was people with bad credit and no money. For some reason, these people all wanted cars way beyond their means, and were almost always car illiterate. I would often see people accepting a 30% interest rate financing on an old rangerover. These customers, with bad credit were just actively digging themselves in a further hole.
My advice to you, is that you should try saving your money to buy the car outright, or at least putting down enough to get the lowest possible rates within your income and means. Also to note, greasy car dealerships that easily approve people with bad credit and 0 down almost always have crazy hidden fees.
SirAlan001@reddit
Worried that you are missing those things? Or are you aware that you absolutely should have known those things ahead of time?
The easiest way to get total cost is to look at the term and payments. If they want you to pay 400 dollars for 90 months, you should know how that number compares to the actual value of the car. It seems great to get a 20k car for 400 a month with 0 down, until you realize you're paying double.
Another thing, it is absolutely worth it to do work on your credit score and get pre-approved through a non-dealer lender. Even a couple months of good credit habits can turn an awful interest rate into just a moderate rate--with you having more financial knowledge at the end as well.
PlaneStrawberry9651@reddit
Don't skip checking insurance cost either. sometumes the insurance on certain cars is shockinglyhight for first-time buyers.
Emotional_Bar_2573@reddit (OP)
That's actually a really good point. Some cheap car end up costing way more monthly when insurance get added.
Aggressive-Baby6464@reddit
Try checking local credit unions too before commiting. Even slightly lower interest can save a lot.