If you don’t have a great credit score, it can be challenging to secure a loan for a new or used vehicle. That’s why you’ll see some dealers advertising the fact that they don’t perform credit checks.
Although this option seems like an easy way to get the wheels you need, it could cost you more than you realize.
The dealers don’t finance most automotive loans. They use relationships with financing companies and banks to offer lending products at a higher interest rate.
Why Should I Avoid These Dealerships?
Even though you can get a car without a credit check, it might not be financially wise to make that choice. Most legitimate lenders limit the amount they will offer for a vehicle purchase based on the car’s value. You won’t get some loans approved because the vehicle isn’t worth what you pay.
If the dealership acts as the bank or works with lenders that don’t require credit checks, this limitation doesn’t exist. You could be paying thousands more than the actual value of the vehicle.
Some people feel like they don’t have another choice when a car is needed, and their credit is bad. There could be some alternatives to consider.
Best Alternatives to a No-Credit-Check Dealer
Instead of using a buy-and-pay-here dealership, consider working with an established business that offers to help people with below-average credit. It helps to get pre-approved for a loan before finding a car to know what your spending power will be for the transaction.
If you have poor credit, you can expect to pay more because of the higher interest rate associated with the risk of doing business with you.
It might be better to save up some cash to purchase a used vehicle without a loan. If you cannot afford that option with your circumstances, tread carefully to avoid paying more than is necessary. While no-credit-check deals may not be categorically unethical, “ethics” is always an important consideration in business dealings.