How to Buy a Car With Bad Credit

Bad credit doesn't mean you can't buy a car. It means you'll pay more for the loan, and there are dealers who will try to make you pay a lot more. The goal is to get into a car at a rate that doesn't trap you. Here's how to do it without getting buried.

What counts as bad credit for auto loans

Lenders use different thresholds, but the industry-standard breakpoints are:

Score range	Classification	Typical rate (new car, 2026)
720+	Prime / super-prime	5–7%
660–719	Near-prime	7–10%
620–659	Subprime	11–15%
580–619	Deep subprime	15–20%
Below 580	High-risk	20–29%+ or denial

If your score is below 620, expect a higher rate. If it's below 580, many banks and credit unions won't touch an unsecured auto loan. The path forward is to either improve your score before buying or accept a higher rate with a plan to refinance in 12–18 months once your payment history improves.

Step 1: Check your actual score before the dealer does

Don't walk into a dealership without knowing your number. Pull your credit report from AnnualCreditReport.com (free, federally mandated) and your FICO Auto Score from myFICO.com ($20–40). Dealers pull FICO Auto 8 or FICO Auto 9, which are different from the score your bank app shows you. The discrepancy can be 20–40 points in either direction.

Check for errors while you're in there. Incorrect late payments, accounts that aren't yours, and collections that should have aged off are common. Dispute errors in writing via the bureau's online process. A single removed collection account can jump your score 20–50 points.

Step 2: Get pre-approved before you shop

Your single best move as a bad-credit buyer is arriving at the dealership with financing already in hand. Here's where to apply:

• Your credit union. Credit unions approve members at lower rates than banks for subprime borrowers. If you're not already a member of one, join one before you apply for a car loan. Most allow membership for a small fee.
• Your bank. Even if your bank's rate isn't great, having an offer in hand creates leverage.
• Online auto lenders. Capital One Auto Navigator, RoadLoans, and myAutoloan.com all do soft pulls for pre-qualification that don't affect your score. They're subprime-friendly.

Apply within a 14-day window if you apply to multiple lenders — the credit bureaus bundle multiple auto loan inquiries within that window as a single inquiry.

Bring your pre-approval letter to the dealership. This does two things: it caps the rate the dealer's finance office can offer you (they need to beat your number or you'll use your own), and it signals that you're a serious buyer.

Step 3: Choose the right car

Bad credit limits your leverage at the negotiating table, so control costs everywhere else.

• Buy used over new. A $25,000 used car at 14% for 60 months costs about $582/mo. The same loan on a $45,000 new car would be class="relative z-10",047/mo. Certified pre-owned vehicles from a franchise dealer often come with short warranties and are cleaner mechanically than open-market used cars.
• Keep the loan term short. At high rates, a 72- or 84-month loan costs substantially more in total interest than a 48- or 60-month loan. Run the math: at 17%, a $20,000 loan over 72 months costs $6,600 more in interest than the same loan over 48 months.
• Prioritize reliability. Repair bills on top of a high car payment is how people end up in financial trouble. Honda, Toyota, Mazda, and Subaru all have strong reliability records across model years.

Step 4: Know what BHPH dealers are

Buy-Here-Pay-Here (BHPH) dealers finance loans in-house. They advertise "no credit check" or "guaranteed approval." They exist because they fill a real need, but their effective APRs can exceed 25–30%, they often use payment assurance devices (starter interrupts) that can disable your car if you're a day late, and their vehicle quality is inconsistent.

BHPH isn't automatically wrong. If your score is below 500 and you need transportation and a credit union won't approve you, it may be your only option. But if you can get approved anywhere else, do it there first. BHPH is the last resort, not the first call.

Step 5: Refinance in 12–18 months

If you buy now at a high rate and make 12 consecutive on-time payments, your score will improve. With an improved score, you can refinance through a bank or credit union at a lower rate. This is a real strategy, not wishful thinking. A buyer who starts at 16% and refinances to 9% after 12 months saves real money over the back half of the loan.

Set a reminder to check your score at 12 months. If it's moved 40+ points, request refinancing quotes from your credit union and Capital One before going to the dealer. You don't need to use the original lender.

What not to do

• Don't focus on monthly payment. Dealers love to stretch terms to hit a monthly number. Ask for the total cost of the loan and the APR, not just "can you get me to $400 a month."
• Don't add extras in F&I. Extended warranties, GAP insurance, and paint protection sold in the finance office are all expensive. If you want GAP, buy it through your insurance company at a fraction of the dealer price.
• Don't skip the pre-purchase inspection. On a used car, especially one bought on credit at a high rate, a class="relative z-10"50 pre-purchase inspection at an independent mechanic can save you from a money pit. See the used car inspection guide for what to check.