Once again, I want to remind you, I am a small operation.  So, I am going to try and break it down for you, this will save both of us some time and maybe I can help guide you through how dealerships do financing .  This is not 100% accurate and there are several exceptions to the rule.  However, this is "mostly" how financing works.

Category #1:  "GREAT/GOOD CREDIT"...This is an individual who has a credit score in the high 600's or in the 700's.  

Over the 25 plus years I have been in this business, this is the category that most of my customer's seem to fall in.  95% of the time this customer can buy a car with no money down and get an interest rate in the 2%, 3%, 4% or 5% range.  

However, there is an exception to the rule no matter how good your credit is...  

Example:  Most lenders use one of the 17 different "books" to value the vehicle you are interested in purchasing. The credit unions as a rule will loan 120% of the "retail" value of that vehicle.  If that book value, let's say is $10,000 and the vehicle you are purchasing is $14,000, the bank will only lend $12,000, you will have to put down the other $2,000, no matter how good your credit is.  

So, your thinking, "Well, that vehicle is over priced and I would never pay that much for it".  Well, there are several cases that this happens.

Example: a Toyota Tacoma truck, Toyota 4Runner 4x4, Jeep Wranglers, etc., these vehicles almost always have a higher "market value" then any of the book values.  

Example:  Older vehicles...the lower the price range, the higher the demand, vehicles under $10,000 that are one owner with low mileage and that are desirable, generally sell for more then "book value".  Also, vehicles that are "hard to find", something unique or very sought after will bring a higher "market value".

Most people consider "market value" what you can "actually" buy that vehicle for.  In other words, you search the internet for a certain car and every ad is over "book value".  Just because a vehicle has a higher "market value" then what the "book value" is, does not mean that it is over priced.  You as the consumer just have to do your homework and shop around to see what the actual fair "market value" is, and can you buy that type of vehicle for "book"?.

Category #2:  "GOOD/FAIR CREDIT"... This is a customer that has, let's say, a low 600's credit score.  Generally speaking, with the credit unions, you can still get financed and you will still get the lower interest rates as described above in category #1, with the exception of maybe a 1 or 2 percent higher interest rate (still a great deal).  

However, as we discussed in category #1, about the "book value"... depending on your credit score, the bank may only want to loan 110% or 100% of the retail "book value".  If you have a few extra dollars to put down, you will end up with a great loan with great terms.

Category #3:  "FAIR CREDIT/CREDIT CHALLENGES"...This is typically someone with a score in the 500's.  Don't worry, there are several programs for this situation too!  There are a "few" credit unions that will be understanding to your situation.  

As we discussed in Category #1, it's all about the "book value".  In these situations, you just need money down.  A "fair" blanket statement that most dealer's would agree on is that you will need 20%-30% of the total purchase price of the vehicle, if you are a category #3 customer.

Example:  If you are looking at a $9,995 vehicle, you will probably be around $11,000 out the door.  Generally speaking, a down payment of $2,500-$3,000 will probably get you approved.

Category #3 (credit challenges) is actually the most complicated in all of financing.  Let me tell you why, as brief as I can.

Every customer with "credit challenges" is different in so many ways.  

Example:  Let's say you had a bankruptcy, a short sale, a foreclosure, sure your credit probably falls into category #3, but, it might not be as bad as you think.  There are several credit unions that will still lend to you.  The main reason...because your score is actually improving and going up, they understand that you are trying to do the right thing because you are in the beginning stages of re-establishing your credit.  

The number one thing you need to get approved at the credit unions, being a recovering credit challenged customer is, ready for it?  Your "AUTO SCORE"!  Oh, Brett, what the heck is an "auto score"?  This sure is getting complicated, right?  Your "auto score" is the way you have paid your auto loans during your credit history.  Yes, this is a BIG deal if you have other credit challenges.  You probably have a 50/50 chance of getting a good credit union loan, with good terms, if your "auto score" is good.

Example:  I had a customer that had around a 580 credit score and I got him a credit union loan for 4.5% interest, because he had a good "auto score".  Now, he did have to put a little more money down because the credit union would only loan 90% of the "book value" (because of his situation), but it was a great deal for him to get such a great loan term and interest rate.  Here is the interesting thing about that customer...during his "bad times" he was a couple month's behind on his existing auto loan.  However, his "auto score" was good because he fought hard and got the loan caught up and current...that's the key!  Doing the right thing goes farther then you can imagine when it comes to credit union loans.  Big banks would have said "no way"!  

Example:  I had another customer that also had a 580 credit score and had $500 down.  He also had a good "auto score".  However, the $500 down was not enough to get the deal done.

Example:  I had a customer that had a 580 credit score but he had a bad "auto score"  However, he had 25% of the total out the door price as a down payment.  I got him approved because he put "skin in the game".  The big one on this, he ended getting a 23.9% interest rate.  I could not get the credit union to take him, I had to put him with a higher risk lender.  You know what though, the customer was OK with it because he knew that he had issues and this was a good way for him to rebuild his credit.

Example:  I had a customer with a 540 credit score, a bad "auto score" and he just had his car repossessed.  Not good right?  I couldn't get them approved, right?  Wrong, the key to their deal was that they had to put 50% down, and he has to pay a 23.9% interest rate.  The key for this customer was having a good amount of skin in the game.

Example:  Last one, I promise!  As you can see, there are endless scenarios for credit challenged customer's.  I had a customer with a 520 credit score, no auto loan history, at all... so no "auto score".  However, they owned their home and have lived in it for 20 plus years.  They had a good job that they have been at for 9 years.  This individual only had to put down $1,500, that was on a Jeep Wrangler, which is one of those "market value" vehicles that we spoke about in category #1.  The interesting part of this story is that I had at least 10 other people, with credit challenges, that wanted to buy that Jeep, they all had to put in excess of $5,000 down to get approved.  Now she did have to go with the 23.9% interest, but I did get her approved.  

The "overview" to this example is...you just never know how the lender is going to see you.  

Just because you have a low/bad credit score does not necessarily mean that you can't get approved to buy a car.  

Note:  If you know you have credit issues and you only have $500, the probability is generally NOT GOOD that you will get approved.  

If you have credit challenges, a low score, money down so the lender can see that you are willing to have some skin in the game and you are generally a good person trying to rebuild your credit, I may be able to help you out.

One last thing, I am sorry, I know I promised...this one will strike you as strange.  When you are dealing with higher risk lenders, believe it or not, the vehicle that you are wanting to purchase has a lot to do with the "approval".  

Example:  The Jeep Wrangler we talked about earlier, 90% of the time, the higher risk lender's don't like these, at all!  In general, they like, what's a good example...a 2012 Chevy Malibu with 90,000 miles, "nothing special" right?  They generally don't like the low mileage, specialty cars, like a low mileage BMW for example.  Now the credit unions LOVE that BMW, they will lend on that all day long!  Don't get me wrong, I can get you approved for just about any car.  Just be aware that most of my vehicles fall into the "credit union" type of vehicle.  If I have to send you to a higher risk lender, you will, more than likely, have to put more money down then you would on a car that falls into the "nothing special" category.