“GUARANTEED APPROVAL” is written in big block letters across the front windows. You fill in a credit application online and wait. And wait.
Finally, you receive word that you’re ‘approved’ for a $10,000 car but only with an unattainable down payment and a co-signer too. Does that work for you? We didn’t think so.
One of the most frustrating experiences for Canadians with bad credit, no credit, or poor credit is trying to find a dealership that can help.
Customers quickly find that just because there’s a sign out front saying “All Applications Accepted” or “100% Approved”, it doesn’t actually mean that everyone can get vehicle financing.
Read on to discover the benefits of bad credit dealerships, what to look for in the right dealership, and how Canada Drives can help...
The benefits of bad credit dealerships
Did you know that 1 in 4 Canadians is in a subprime or near-prime credit situation. If your credit rating is less than ideal, take comfort knowing that you aren’t alone and that a quarter of Canadians are in a similar place with their credit.
Bad credit dealerships help Canadians get into the driver’s seat of the vehicles they need. In most dealerships, financing is approached cautiously to educate and protect the buyer from getting into further credit trouble. A subprime car loan is a valuable tool for people who find it hard to secure financing from traditional lenders such as banks.
But what about the extra interest costs you incur at bad credit and no credit car dealerships?
Unless it’s in-house financing, the dealership doesn’t set the interest rate or payment schedule. That’s done by the lender who’s taking on your loan. They’re also taking all the risk by financing your vehicle. It’s up to you to decide whether the terms are acceptable or if you’d rather wait to buy a car.
But remember, when you purchase a vehicle at a reputable bad credit car dealership, it can help boost your credit rating! Obtaining a car loan looks great on your credit report, assuming that you keep up with the payments every time.
How to find the right bad credit car dealership
Normally, car dealers approve you for a vehicle first, then get you approved through the manufacturer’s financial branch or a low-interest lender. This is the process for those with a good or excellent credit rating.
If you don’t qualify for normal bank rates or approvals due to insufficient or bad credit, car dealerships follow an alternate route to get your car loan approved. There are lenders who specialize in loans for people with no credit or bad credit.
Some bad credit dealerships may decide to skip the financial institution altogether and finance your car loan themselves. They’re known as in-house financing dealerships. They have complete control over who they say is approved and who isn’t.
And if you aren’t asked to fill out a credit check first, you’re probably staring down the barrel of sky-high in-house interest rates, and your loan won't be reported to credit bureaus. This means that a no credit check loan is often NOT helpful for rebuilding credit.
To summarize:
- Bad credit dealerships help people with poor credit history – delinquencies, repossessions, default judgments, and collections, for example – rebuild their credit with a loan through specialized lenders.
- No credit dealerships specialize in matching new Canadians, recent graduates, and those who haven’t had a reason to establish credit with a lender who will help them build credit.
- In-house financing dealerships use their own funding sources to finance loans for people who don’t qualify for traditional loans or have poor credit.
- No credit check dealerships offer loans with extremely high interest rates without helping you build or rebuild credit.
Dealerships that help bad credit customers should have these 3 things
What’s important for car shoppers with bad credit who are looking for someone to help them get a car loan? Here are three things you should be able to check off when you’re shopping for a dealership:
1. Diverse inventory
The first thing to look for before you decide to proceed with an application and obtaining financing from a dealership is to have a look at their inventory. If there aren’t any cars in their inventory that you’d be happy driving, then it doesn’t matter if you can be approved or not.
Also, dealerships that are equipped to help bad credit customers should have large inventories of new & pre-owned vehicles that include a wide variety of cars, trucks, SUVs and minivans. If you have bad credit, you'll find great value at a used car dealership and a greater selection of high-quality vehicles that match your budget!
2. Dependable lenders
If dealerships want to work with subprime customers, they need to have a wide variety of lenders to access when applying for financing on your behalf. They will have access to regular lenders like TD, BMO, and RBC, as well as alternative lenders including Scotia Dealer Advantage, CarFinco, and Rifco.
Some dealerships even run in-house financing, meaning that you make payments directly to the dealership (sometimes known as buy-here-pay-here dealers).
3. Knowledgeable staff
The dealership should have a separate subprime department that looks after alternative financing solutions and not just a salesperson who helps out when he’s not busy with his other responsibilities.
How can I find bad credit car dealerships near me?
“Where can I find in-house financing dealerships near me?” If you’ve asked Siri, Google, or Alexa for help finding a nearby car store, you might be taking the wrong approach.
Nearly every car dealership will claim to offer car loans if you have bad credit.
While that’s true to an extent, an inexperienced or unscrupulous dealership can do more harm than good. It’s important to find the right dealership, not just any “bad credit dealerships near me”.
It's a good idea to ask your friends and family for referrals. If you know of someone who has been in your shoes, they can help narrow down your search by telling you if they had a good or bad experience where they found their vehicle.
Furthermore, talk with the salesperson or finance manager at the dealership. A dealership that specializes in subprime credit loans will be able to clearly walk you through the steps from application to driving away.
Start getting approved again
If the thought of hopping from dealership to dealership makes your head hurt, why not get pre-approved online with Canada Drives?
Canada Drives can get you pre-approved for a car loan in minutes, regardless of your credit score.
Get started today with a 2-minute, no-obligation pre-approval.
