When you need a new car, you can't wait for your credit score to improve. If your credit score is low but you are in need of a vehicle, you can still get a car loan; you just need to make sure that you are prepared before you walk into a dealership to get a loan.
Know Your Credit Report
When you walk into a dealership and start working with them on financing, one of the first things they are going to do is look up your credit report and your credit score. Your credit score is going to impact the type of auto loan that you can get.
It helps when you know what your credit score is before the dealership pulls up your credit score; that way, you can fix any issues with your credit report if there are problems with it. Knowing your credit score can also allow you to explain it to the dealership and will allow you to have targeted talking points prepared to demonstrate that you are ready to purchase a new vehicle.
Have an Idea of What Type of Payment You Can Afford
Next, you need to have an idea of what type of payment you can easily afford to pay on a monthly basis. You don't want a payment that will stress you out each time you have to pay it; it's a good idea to keep your payment below a set percentage of your take-home pay, such as ten percent. For example, if you are bringing home $1,000 a month, you would want a car payment that is around $100 per month. Spread out over a five-year car loan period, that would mean that you can afford to borrow about $6,000 for a car loan. Don't extend out the loan period further than five or six years, especially for a used vehicle.
Knowing what you can afford will help you determine what type of vehicle to look for. If you can afford payments of $100 over six years, you are looking at a car in the $6,000 price range; if you can afford payments of $300 over six years, you are looking to purchase a car that is around $18,000 price range.
Have a Down Payment Ready
Finally, you need to make sure that you have a down payment ready. Having a down payment will reduce the amount of money that you have to pay for the vehicle; it will also show that you are financially responsible, even though you have a poor credit score.
If you've found the perfect Lexus for lease or sale but you have a poor credit score, you need to know what your credit report looks like before you go into the dealership. You need to know your price range for a new vehicle by deciding beforehand what type of monthly payment you can afford. Finally, have a down payment ready to go in order to sweeten the deal and help you get a loan.