Bad Credit & Negative Equity
If you have low credit or owe more on your trade-in than it's worth, you are the #1 target for predatory dealers. They count on your desperation. Don't give them that power.
You Are a Target
Subprime buyers get the worst deals in the car business. Here's what they'll try:
Negative Equity Rollover: "We'll pay off your trade!" means they're adding that debt to your new loan. You'll owe $30k on a $20k car.
Buy Here Pay Here: 25%+ APR, GPS trackers, repos at the first late payment. These dealers sell cars others rejected.
Yo-Yo Financing: They let you drive home, then call saying "financing fell through" and demand worse terms. This is a scam.
Check Your Negative Equity
Enter your current trade-in situation to see how underwater you are. This number gets added to your new loan if you roll it over.
Call your lender for the exact payoff amount
Get quotes from CarMax/Carvana for comparison
Net Equity Position
DANGER ZONE
You owe more than the car is worth. If you trade this in, the dealer will add this $3,000 to your NEW loan. You will be paying interest on a car you don't even own anymore.
What is GAP Insurance?
GAP (Guaranteed Asset Protection) insurance covers the difference between what your insurance pays and what you owe if your car is totaled or stolen.
• Dealer price: $500-$1,000 (often rolled into loan = more interest)
• Your insurance company: $20-$50/year (add to your policy)
• Credit union: Often included free with auto loans
Never buy GAP from the dealer. Call your insurer first.
Don't Make It Worse
When you're underwater, dealers may try to sell you a problem car knowing you're desperate. Before you buy, run the VIN to catch hidden accidents or title issues.
Check Vehicle HistoryTip: Always verify your "Payoff Amount" by calling your lender directly. Do not trust the dealer's estimate.
Subprime Battle Plan
Don't skip steps. They count on you being lazy.
Phase 1: The War Room
Bad credit makes you a target. Prepare carefully.
Know Your Exact Score
Check all 3 bureaus. Dealers will use the worst.
Try Credit Unions FIRST
They're more forgiving and cheaper than dealers.
Set a REAL Budget
Include insurance - it's high with bad credit.
Avoid 'Buy Here Pay Here'
These dealers prey on desperation.
Should You Wait?
Sometimes waiting to improve credit saves thousands.