One of the most common questions received by Oxmoor Mazda’s Special Finance Department is: Are no money down car loans really possible? The answer is YES! However, there are many routes to obtaining a car loan with little or money down. Each buyer has their own set of circumstances and no two situations are exactly the same.
If you’ve been searching for a vehicle but your cash flow is a bit tight, you’ve come to the right place. This page is designed to help drivers and potential car buyers near Louisville, KY understand no down payment car loans and how they work.Â
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Purchasing A Vehicle With No Money DownÂ
There are many reasons why people in the Louisville, KY metropolitan area may need a car loan with little or no money down. For some of our customers, the issue is simply cash flow – the majority of their monthly income is spent on existing debts and very little money is left over to use for a down payment on a vehicle.
In other cases, auto buyers find themselves with large debts as the result of unfortunate personal issues, such as a divorce or bankruptcy, which limit their available cash. If this sounds like you, don’t worry. This is not uncommon and something our Special Finance Advisers deal with every day.Â
Factors In Obtaining Auto Loans with No Down Payment
When determining whether an auto buyer is eligible for special financing, lenders specializing in no money down car loans are analyzing the risk level of a potential borrower. Factors that they examine include:Â
Current monthly income and job historyÂ
Current monthly debt obligations
Current credit scores and credit history
Past vehicle payment historyÂ
Prior relationship with the auto lender (if applicable)
Vehicle trade equity (if applicable)
Down payment money is typically required by special finance lenders when they determine a borrower is higher risk. Limited income, high debts, and spotty job history increases a lender’s risk. The more risk a lender assumes, the more likely it is that they will require a down payment from a borrower.
Auto Financing with No Down Payment – A Closer Look
To better understand the factors that go into no money down auto financing, let’s examine each item separately:
Monthly Income and Job History
Monthly income helps a special finance lender understand how much a borrower can afford per month. Some special finance auto lenders have strict minimum monthly income requirements while others do not. In addition, if a borrower has recently switched jobs, providing evidence of consistent job time and income history is helpful in convincing bad credit auto lenders to approve financing.  Â
Monthly Debt Obligations
While a borrower’s income level is certainly important, special finance lenders typically focus more on how much debt a person currently has. Why? Because the lender wants to ensure the borrower can afford to pay the monthly auto loan obligation. If a borrower has difficulty paying their current debts, adding another monthly payment would only increase the likelihood of a loan default.
Credit Scores and Credit History
While some special finance lenders require minimum credit scores, many do not. A large number of special finance lenders consider the borrower’s entire credit profile and make decisions based on the borrower’s current circumstances rather than their low credit scores. Lenders will consider multiple factors when considering borrowers for no money down car loans.
Past Vehicle Payment History
Past vehicle payment history is extremely important to potential lenders. How someone has paid their past debts is a good indicator of their future behavior. For example, a borrower may have incurred a bankruptcy due to overwhelming medical debts, but never missed a payment on their auto loan. This type of borrower would be a much lower risk than someone who has had several vehicle repossessions.
Prior Relationship with Special Finance Lender
If a borrower had a loan in the past and maintained a good payment history, that particular lender may be willing to approve a new loan. Exceptions for past customers with good payment histories is not uncommon and no money down car loans are possible.
Vehicle Trade Equity
Vehicle trade equity is among the easiest methods by which to achieve no money down car loans. If a borrower currently owns a vehicle without a lien (paid off), the trade value can be used in lieu of a down payment. Even vehicles that don’t run are worth something! Not sure what your vehicle is worth? Our Special Finance Advisers can help you to evaluate your trade.
Auto Loans with No Money Down – Things to Remember
While many factors affect a special finance lender’s loan approval, it is important to remember that these factors do not apply exactly the same to every person and are analyzed in relation to a borrower’s unique situation.Â
For example, if a borrower’s credit profile is exceptionally strong, other factors such as income or trade equity become less important. Likewise, some lenders will look past a borrower’s low credit scores due to their high income and low debts.Â
In some cases, a borrower may have poor credit and moderate income, but tremendous amounts of equity in their trade vehicle. Each negative factor can easily be balanced by one or more positive factors.
No matter your credit or financial situation, Oxmoor Mazda’s Special Finance Department can help you achieve quality auto financing. As Louisville, KY‘s #1 no money down car loan dealership, our bad credit experts can help you explore different options in order to secure the type of financing you need.
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