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No Credit Check Used Cars
Obtaining financing for used vehicle purchase can be tough. What’s even tougher is trying to obtain the same financing but with bad credit. Thousands of people in the United States are denied automobile financing every day due to poor credit health.
Regardless of credit, people need to be able to obtain transportation in order to facilitate finding and keeping a job, making necessary trips to the doctor or grocery stores and attend to other basic needs. The good news is that while obtaining traditional lending on a used vehicle may be tough, there are ways to purchase a used vehicle without undergoing a credit check.
Purchasing a Vehicle
One way to obtain a used car without undergoing a credit check is to buy one with cash. A used car can be purchased from an individual, car lot, or through an auction, though obtaining entry into a vehicle auction may require special licensure, depending on the venue.
One way to find used vehicles is to look through the local classified ads. This can include the classified section of your local newspaper, specialty classified publications and online classified services such as Craig’s List. While the inventory of used vehicles will generally be privately owned, many dealers will also list used inventory for sale through these venues.
Another way to purchase a vehicle without a credit check is through dealer financing. Dealer financing, also known as buy here-pay here arrangements allows the dealer to sell a vehicle based on his or her own credit terms, which often preclude the need to pull a credit report. These financing arrangements were designed specifically with credit-challenged individuals in mind.
In a typical dealer financing arrangement, the dealer will carry the note on a vehicle off his or her lot in exchange for a sum of cash, otherwise known as a down payment, and an agreement by the new owner to make regular weekly or monthly payments until the balance of the sales price has been satisfied. The dealer will usually charge a down payment that is equal to the amount he or she purchased the vehicle for. This covers the dealer against the loss of his or her initial investment. Payments made toward the balance of the loan will be pure profit for the dealership.
The dealer will place a lien against the title of the vehicle for the duration of the loan as added security against the risk of default. The lien allows the dealer to take possession of the vehicle in the event the borrower fails to make timely payments as a way to recoup lost profits. The dealer is then free to resell the car after specified timeframes are met. When the balance of the loan is satisfied, the dealer will remove the lien and transfer the title to the new owner.
How to Apply for Dealer Financing
A dealer will usually advertise if dealer financing is available at his or her dealership. When purchasing a car through a dealer financing arrangement you will be required to present certain documents to the dealer for documentation of the loan. These items can include:
These documents are not procured as a means of determining creditworthiness as much as it is a way for the dealer to keep tabs on the vehicle in the event of default.
Pros and Cons of Dealer Financing
One of the major pluses to dealer financing is the ability to purchase a vehicle without having your credit checked. Credit blemishes prevent many people from being able to finance a used car. Dealer financing offers them another choice.
Another benefit is the fact that defaults on these types of loans will generally not affect the customer’s credit unless a judgment is claimed against the borrower. Usually this does not occur as long as the collateral is returned to the dealer. Both parties will walk away from the deal with no further commitment.
One of the major drawbacks to a dealer financing agreement is the cost. Dealers will sell used vehicles at retail prices in order to maximize profit. The vehicles may not be in retail condition, making the car worth much less than what you pay for it, however, the effect is not unlike what happens to new vehicles that undergo significant depreciation.
Another drawback is the lack of guarantee on the condition of the used vehicle. Dealers that specialize in buy here-pay here agreements generally do not undergo the expense to have their vehicles extensively examined for mechanical or cosmetic defects and therefore do not offer any sort of warranties or guarantees. It is the responsibility of the new owner to make repairs to the vehicle at their own expense, just as if the car was owned outright.
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