Can I finance a 10 year old car with bad credit?

Subprime lenders offer bad credit auto loans, but they have rules about the age and mileage of the vehicles they are willing to finance, as well as the minimum and maximum loan amounts they accept. This probably means that you won’t be able to finance a 10 year old car if you have bad credit, but you might be surprised at what you can finance.

What are the vehicle requirements for bad credit auto loans?

It is difficult to define details because each lender has different rules when offering bad credit auto loans. However, we can say that you can expect subprime lenders to share these three requirements:

  1. Vehicle age limit – Subprime lenders have a maximum age for the cars they finance. Generally, they do not finance vehicles older than 10 years, but this limit varies among lenders. If you have bad credit and want to finance a 10 year old car, you will need to ask the dealership what their age limits are up front.
  2. Vehicle mileage limit – Bad credit lenders also set limits on how many miles a car can have. They generally only accept vehicles with less than 100,000 miles on the odometer, but, again, this varies from lender to lender.
  3. Minimum and maximum loan amount – Subprime lenders also set a minimum and maximum loan amount that they accept. The usual minimum amount you can finance is $ 5,000, while the maximum loan amount is around $ 30,000. Do not confuse the loan amount with the sale price. The vehicle you choose could cost less than $ 5,000 and you could still be approved as long as the total amount financed exceeds the minimum after taxes, fees and other additions.

How to budget for a bad credit car loan

Now that you know the general car limits, this can help you budget for a bad credit auto loan. To budget properly, you need to know if you have enough disposable income to qualify by calculating your debt-to-income (DTI) and payment-to-income (PTI) ratios.

The DTI ratio compares your monthly bills to your monthly income. Subprime lenders only approve applicants if their DTI ratio is around 45% to 50% or less. To find yours, add up all your monthly bills, including an estimate of the vehicle and insurance amount (which you can calculate with our Monthly payment calculator). Then take the sum and divide it by your monthly pre-tax income.

Your PTI ratio, on the other hand, tells you how much of your income is spent on a monthly payment. Subprime lenders set their maximum acceptable PTI ratio around 15% to 20% or less. To calculate it, multiply your monthly income before tax by 0.15 and then by 0.20 (20%); the resulting range is the maximum amount of your monthly payment that you can still expect to get approved from a subprime lender, but the lower you aim, the better off you will be.

Finally, you should also know that a deposit is usually required when taking out an auto loan for bad credit. Down payment requirements also vary, but subprime lenders typically charge $ 1,000 or 10% of the car’s sale price, whichever is less.

Auto Express Credit Tip: We recommend that you make the largest down payment you can afford if you have bad credit. A larger down payment can help offset the higher interest rate associated with a bad credit auto loan. This is because depositing money reduces the amount you need to borrow, which in turn reduces the total amount of interest charges you pay over the life of the loan.

Ready to finance your next car?

You may not be able to finance a 10 year old car with bad credit, but you can still get approved for a car loan if you work with the right dealership. Auto Express Credit is here to help you find one near you.

We are partnered with a national network of specialty finance brokers who work with subprime lenders. Let us put you in touch with a local dealer. Get started with our simple and no obligation auto loan application form right now!

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