You can have poor credit and still be approved for an auto loan through a captive finance company. Here is how you do it.
Captive finance companies were created by each automaker to keep money in house from start to finish. Since they are in-house finance companies, they can take on customers that normal financial institutions would not normally work with. The two key factors here are that you must plan to purchase a new car, and it will be a car that is chosen for you. This is because the in-house finance manager will usually call the captive finance company first and discuss your situation, your income, and other factors and they will then tell the finance manager how much they will finance. Indeed, if they decide to pick you up as a client, even if you have a poor credit score or bad credit, you will be told what you will do all the way through the process.
While captive finance companies often facilitate new-car purchases, they often tell you that you will have to make a rather large upfront investment out of your own pocket. This is actually very fair because they want to make sure that you understand the commitment they are making to you, because of your poor credit, and they want to make sure that you have substantial equity in the vehicle so you won't walk away or try to walk away should things go bad. They may also make it a requirement that you set up an automatic payment program so that they are paid every month
In the world of standard car loans, finance companies are governed by a clear set of rules. They know how much you have to make in order to grant a loan. There are guidelines about the amount of your debt to income that they will permit. There are guidelines about your FICO or loan score which is often the most important piece of information for them. There are also guidelines about your debt picture in general. Captive houses, on the other hand, can look around these barriers because they know they have the ultimate weapon in any disagreement: repossession. Yes, it's a nasty word and it is one that isn't bandied about and one that you should watch because it will just worsen your already poor credit. Repossession will also make it impossible to purchase a car for many years, so the captives know they have your car as collateral and they also know that this is a vehicle you want to keep, so the ball is in their court. Make sure you have a good relationship with the captive house.
Captive, in-house companies provide you with the money that an auto loan company cannot, because of the constraints under which they operate. They have to show a profit and they also have to ensure that any investments made will be paid back. Captives, on the other hand, provide the money that standard loan companies cannot, but you must understand that you have to work with them closely and that you have very little freedom in the choice of vehicle. It's often chosen for you so that the finance office can get you though the captive finance firm–GMAC or Ford Credit, for instance–and you must also come up with the down payment they say you need. Submit the necessary papers they require and you'll have your loan.
