I Need a Car, but My Credit Is Awful. Will I Get Ripped Off?

Cars that are for sale sit parked under canopies on a parking lot.
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Dear Penny,

My mechanic just told me my 16-year-old car is a fire hazard and that my only option is to sell it for scrap metal. I’ll probably get $100 for it.

I have no money saved, and I’m recovering from wrecking my credit in college. But I need a car ASAP. Public transportation where I live is a joke, and my job requires me to travel across three counties.

I know I’m going to have a high interest rate due to my bad credit, and I’m OK with buying an older used car. But I’m terrified of negotiating with a used-car salesperson. My parents worked out the terms of the deal when I bought this car as a teenager.

I’m afraid the salesperson will sense my desperation — especially since I don’t have a trade-in and I don’t have much time to shop around — and tack on extra fees and interest.

Any tips that will help me deal with a used-car lot?


Carless and Credit Challenged

Dear CCC,

While we advocate for buying used cars and maintaining them for the long haul here at The Penny Hoarder, I cannot say the same for driving a rolling fire trap. It’s time for an upgrade.

Since Mom and Dad aren’t here to help (and even if they were, I’d still advise doing this), it’s time to arm yourself with as much information as possible. Research the fair market value for cars in the model year and condition you’re considering to help determine a reasonable budget. Kelley Blue Book and Edmunds are good places to start. Asking friends and family members about their cars can give you a personalized idea of what you can expect from gas mileage, maintenance needs and other peculiarities.

Next, it’s time to arm yourself with financial knowledge. Go to AnnualCreditReport.com and pull your free credit report to ensure you know the cause of any negative marks. Find out your credit score, which is available through a variety of free services. A good place to start is to log in to your bank account to see if your bank offers a peek at your FICO or VantageScore number.

But keep in mind that auto dealer financing departments use a souped-up scoring system that might result in a slightly different score than you’ve obtained yourself.

While you’re logged into your bank account, request a quote for an auto loan to get a solid idea of what interest rates you can expect for car financing. Remember: You don’t necessarily have to get financing from your dealer — you can take in a preapproval offer on your own.

Now, about the actual act of going to the used-car lot. Make sure to eat before you go, because hunger makes us take drastic and desperate measures. Then, play it calm and cool. Don’t go into the interaction fearing you’ll get tricked — that’ll just make you more nervous.

Instead, focus on the goal: You need a reliable vehicle at a good price. You’ve got the facts: your credit score, your preapproval rate, your car research. They’re just facts. Stick with the facts, and be ready to walk away if you don’t feel your needs are being taken seriously — even if walking away just means walking to the car lot next door.

One last option, if you’re still nervous about taking your research into a traditional auto dealership: You can always visit a lot that advertises “no haggling.” If you take this route, it’s even more important to do your pricing research, and you’ll still want to check reviews before you stop by.

The bottom line: Arm yourself with knowledge — and confidence — if you don’t want to be taken for a ride.

Have a tricky money question? Write to Dear Penny and you might see your question answered in an upcoming column.

Lisa Rowan is a personal finance expert and senior writer at The Penny Hoarder, and the voice behind Dear Penny.