Poor credit history car loan interest rates can be very high. Afterall, this is risk based lending. In Australia the maximum advertised rate is 29.9%. However, depending on your credit rating and how bad it is, you may be entitled to a much a lower rate. A competitive rate in this space would be around 18%. Your chance of getting the best rates in market will occur if your credit rating is overlooked due to you having stability in your home, job and everyday banking activity. You may qualify for much less than 10% as well.
WARNING: If you read this website, your chances of getting car finance with bad credit will dramatically improve.
Other factors that will influence the rate will be:
The age of the car; if you're buying a brand new car you might be entitled to get a rate less than 10%. Most people who have bad credit will apply for a loan of only a few thousand dollars as this is what they think lenders will give to them. However, lending a few thousand dollars on a car means the type of car you are buying is less reliable. Statistically the lender is better to lend you money so you can buy a newer car (if not brand new) as it is going to be more reliable and will cost much less to maintain.
Where you buy the car from; Some financiers in this space will not lend to you if you are buying a car privately whereas some will. Lenders who will loan you money for private car sale loans usually only have a fixed rate of 29%. There are additional risks when you buy privately versus a dealer. A dealer must give you a three month statutory warranty when they sell you a car. When you privately, you buy “as is”.
The LVR (Loan to Value Ratio); Lenders will work off an LVR. This in simple terms means that you cannot borrow more than 150% of the cars retail value usually. The lenders work from industry guidelines on what a car should be sold for, for example, $10,000, however if you are buying that $10,000 car for $13,000 it has an LVR of 130%. A lot of used car dealers will sell the used car for much higher than its worth, and if they know you have impaired credit, they know they don't have to negotiate as much as you have less options. This is why you should always get pre-approved first before going to any car dealership.
Stability; A lender is more likely to lend money to you if you have stability in your living situation and employment. If you have changed jobs every 3-4 months a financier is unlikely to lend to you as the chances of you retaining a job (based on your previous employment history) are slim. Same for moving homes every few months. You dont have to be a homeowner to get the best rate. If you had been renting in the same house for two years and had the same job for 12+ months, this will be looked at favourably.
Summary
A lender will look at your application and look for every reason to approve you. They want to be doing business with you. They will look to give you the fairest interest rate which reflects the risk they have in you not repaying the loan. Be honest from the start.
