If you’re like a lot of Americans, the current financial crisis has come as a bit of a surprise. While the government works out a plan to solve the credit problem, many consumers are finding it difficult (sometimes even impossible) to buy a car. It’s not that cars are too expensive – far from it in fact – it’s that there aren’t a lot of banks lending money. This is especially true if your credit is less than perfect. “Sub-prime” car loans for customers with bad credit are harder than ever to acquire. However, there are some tips that will help you maximize your chances of getting a car loan if you have bad credit.

1. Buy a new Toyota. Toyota Motor Credit is now one of the largest auto lenders in the US, and for good reason – they can borrow money from Wall Street at interest rates that other auto lenders can only dream about. That means they can offer loans at a better interest rate to consumers, even customers with bad credit. While Honda, BMW, and Mercedes also enjoy preferred lending from big banks, they don’t offer the sort of terms that Toyota provides for credit-challenged customers.

2. Buy a new truck or SUV. There has NEVER been a better time to buy a new truck or SUV. Huge discounts, generous cash incentives, and aggressive finance offers are available for anyone looking to buy a new truck or SUV. While it’s going to be more expensive to fill-up these vehicles, all the discounts and incentives mean a person with less-than-perfect credit can often get a loan offer. Just make sure to buy a smaller truck or SUV (say a Toyota Tacoma or Rav4) that you can afford to fill up.

3. Have you called your credit union? Credit unions often use generous lending guidelines that are favorable for most consumers – especially for anyone with a poor credit history. They also offer a personal touch and a loan approval process that many consumers find friendly and helpful. If you don’t currently belong to a credit union, check with your employer and/or H.R. department to find out what options are available to you.

4. Check out the certified used cars. GM, Ford, and Chrysler now offer aggressive certified used vehicle programs with great warranties and aggressive financing, just like Toyota and Honda have been doing for years. If you’re trying to buy an inexpensive vehicle with bad credit, a CPO car might be worth a look.

5. Stay away from “buy-here-pay-here” car lots. Because of the current credit climate, a buy-here-pay-here dealership may seem like a decent option. However, for most consumers, a buy-here-pay-here car loan is a bad idea. First, the payments are rarely reported to the credit bureaus, meaning that you’ll get little or no benefit from making all of your payments on time – your credit score will not improve. Second, many of the vehicles being offered at these dealerships aren’t worth half of what consumers are being asked to pay. Steer clear of this option if at all possible.

6. It’s all about cash. Now more than ever before, auto lenders are requiring substantial amounts of cash down. Historically, lenders have found that requiring a large cash down payment from a customer dramatically reduces the chances that they will default on their loan. So, if you’re trying to buy a car and your credit is poor, it’s time to buckle down and save. Put off any non-essential expenses, save as much cash as you can, and you’ll increase your chances of getting approved with every dollar you can put down. Figure 10-20% of the purchase price will be your required down payment.

7. Get your family involved. While we’ve never been an advocate of co-signed loans, if the situation is truly desperate a co-signer can often help a person with bad credit get a car loan. Spouses, parents, and siblings are the most helpful, and they usually have to reside in the same state. It’s also important to note that co-signers don’t help much with an approval if you’ve already had a car loan without a co-signer. This should be a last-resort option.

It’s important to remember that this credit crisis will likely be short-lived. Analysts estimate that the credit climate will normalize in the next 18 months. While it will never be like it once was (when nearly anyone could get a car loan regardless of credit history), people with bad credit should be able to get car loans again very soon. Make sure to apply for credit at a few different lenders too – that will help you figure out what your options are. We have a recommended list of auto lenders you can register with.

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