Auto Net Financial News

How to Pay Zero Down for Auto Loans with Bad Credit Scores

August 12, 2009 by scypher

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It is possible to get a bad credit car loan with zero money down from local dealers in your area, but you have to utilize the proper lending company and finance methods.

The Popularity of “Zero Down” Car Loans

At AutoNet Financial, we’ve noticed that one of the more popular internet search phrases is “Zero Down Auto Loans”. We would imagine the reasoning behind this particular search would have to do with the fact that the consumer wants to use no money down car loans as a way to help keep some cash in their pocket. Customer cash, however, is not the only form of down payment. There are two others: trade value and new car rebates.

As for those actual “zero down” loan programs, there are only a few true no money down auto loan programs for people with poor credit and most of these we would not recommend. The repayment terms for these no money down auto loan programs are less favorable than those lender programs that require money down.

Customer Cash

We realize that when most people hear “money down car loans” they relate this to “cash down”. There are a few car loan programs that require cash as a down payment. Most loans, however, even bad credit car loans, do not differentiate between cash down and trade value as a down payment.

Vehicle Trade In Value

Most auto financing programs allow vehicle trade value as an acceptable form of down payment in order to meet their minimum required dollar value for borrower equity. Car dealers, in particular, use this as a tool to help their customers meet the minimum required down payment. Here is how it works:

A consumer has a high mileage 2000 Ford Escort with a blown engine. Other than to a junk yard (remember, even the “cash for clunkers” program requires that the vehicle is in running condition), the vehicle has no value. The dealership appraises the vehicle, sight unseen, at $100.

The consumer wishes to purchase a used 2008 Dodge Grand Caravan for $15,000 with no cash money down. The most favorable auto finance terms that the car dealer was able to find is with a car loan lender that requires a minimum of $1,000 as down payment.

In order to accomplish this, the car dealership structures the deal with a selling price of $15,900 and gives the consumers $1,000 for the trade. The net difference in the transaction (selling price less trade) is $14,900. This is the same as it would have been if the dealer sold the car for $15,000 and gave the customer $100 for the trade – but at the same time it satisfies the lender’s requirement for a $1,000 down payment.

Manufacturer New Car Rebates

Many lenders will allow new car rebates in order to meet their minimum required down payment. So if you’re looking to buy a car with no money down and do not have a vehicle to trade, you might want to consider a new car that has a manufacturer’s rebate as a zero down alternative.

The bottom line

There are a few bad credit car loan programs with automobile financing with 0 down. But if you really have zero cash down available, you will usually receive more favorable terms from lenders if you have a vehicle to trade in or if you buy a new car that comes with a manufacturer’s rebate.

For more information about subprime car loans, go to Our website has calculators to help you determine your budget as well as a loan resource center that can help with your questions. If you need additional assistance, our toll free number is listed at the bottom of every page. Here at AutoNet Financial, we want you “on the road” to better credit.

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