How to Trade in a Car With Bad Credit
- 1). Search the Internet for used car appraisal websites or refer to the resource section on this page to gauge your cars trade-in value. Your dealer will determine the true amount of your vehicles worth. But you should have an idea of its value to protect yourself. This vehicle's amount is considered money down towards a new car. Your dealer will call for a payoff amount from your financing institution if there is still an unpaid loan.
- 2). Obtain a pre-approval, if possible, before shopping for a car, which can save you time at the dealership. If you cannot obtain traditional financing, search for bad credit auto loans. You may find a bank to approve you. Also, despite bad credit, do not count out local banks. Apply for a loan by calling or speaking directly to a representative at a local bank. You can find out quickly---from an hour up to a few days---whether you qualify.
- 3). Drive your car to the dealership. Explain your credit situation to the dealer representative and let him run your credit to determine whether a bank can extend you a loan. If he does have a bank, you may have to follow the bank guidelines, such as only getting an approval if purchasing a late model vehicle with little mileage on it. Or, the bank may allow you to purchase a car, but at a monthly payment determined by the financial institution, such as a car with a payment of no more than $200 a month.
- 4). Allow your dealer representative to appraise the vehicle. The vehicle's worth will count as a down payment towards your purchase.
- 5). Wait for an approval from the dealer, which can take a few hours. With bad credit, the amount extended to you may include a low LTV (loan to value) ratio, meaning that the bank will require you to put down a certain amount of money.
- 6). Put the money down towards your car, if necessary, or sign paperwork once you have your final approval. If you have received a preapproval elsewhere, the dealer will read your paperwork and contact the bank to make sure all guidelines are being followed. You will sign your title over to the dealer, sign all Department of Motor Vehicle forms, sign a bank contract and any other paperwork that the dealer requires.
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