Bad Credit Car Loans

Bad credit car loans are available for people with bad credit histories. But at what price?

If the advertisements on TV, radio and in the press are to be believed, then bad credit car loans are the best thing ever to hit the car loan market.

A bad credit car loan is available to anyone with a bad credit history, CCJ's and loan arrears. You could drive away today in a new car - or so the theory goes.

So how does it work? Why do these companies target people with bad credit histories?

Well first of all, let me shatter a myth. The chances of anyone with a bad credit history being offered a good deal are extremely remote. The reason they want your business, is simply because you are desperate and these companies know it!

The bad credit car loan companies know that you want a new car. They know you can't afford a deposit (so you need to borrow more) and they know that nobody else will lend you the money. In short, you are like a fish in a barrel - trapped with nowhere to go.

So what do they do?

According to the advertisements for bad car credit companies, you simply walk into their car sales showrooms, pick a car that you like and then sign a loan agreemen, pay a small deposit and drive off happily into the sunset. Everone is smiling in this picture.

The relaity is slightly different.

First of all, when you visit these people, the first thing that happens is you see your personal advisor. This friendly chap or lady will sit you down and discuss your finances.

"Wait" I hear you say, "I'm here to buy a car - show me the cars first!".

Sorry, it doesn't work like that with bad credit car loans. This is all about the money.

Back to our story...

The smooth talking sales person's job is to get you to decide how much you think you can afford on a new car.

Of course, you don't know how much you can afford, because you're thinking, "I don't want to spend more than £3000". Think again!

After some carefully worded questions, your sales person will suggest a fuigure. It will be a relatively low figure, say £40 per week.

£40 a week might not sound like much, but that adds up to £160 per month - easily enough to service a loan of £2-3000 - over a period that could be up to 5 years.

At this point, you might be thinking that this is all ok, so let's continue our story.

Assuming you agree that £40 a week is ok, the sales person then shows you a very limited choice of car to fit your budget.

Forget style, forget colour choices, this is down to money - and you said you could afford £40 a week - well, for £40 a week, you can drive away today in this - ok, it's a bit older than you wanted and it does smoke a bit when you first start it up, but it will get you from A to B.

Chances are at this point, that you'l probably decide to up your budget. After all, what's another £10 a week?

You might even end up with something a bit nicer, but remember this - it's unlikely that you'll have muuch more choice and it's a dead certainty that your sales person won't have mentioned the actual COST OF THE CAR YET!

You see, they know you are desperate. The price doesn't matter to you - you probably don't pay your debts anyway, so why should you care how much it costs, when it's only going to be £40-£50 a week?

It's only when you come to sign the doucments taht the price will be shown - and it will almost certainly be more than you'd pay at a used car showroom.

But of course, that doesn't matter, because at least here, you can drive away in a new car today - and you can't go elsewhere, so what choice do you have?

The real stinger is in the interest rate though - the REAL reason that specialist companies are interested in lending you money.

The higher the risk for the bad credit car loan companies, the higher the interest rate. All of these companies will offer car loans at rates above 20% (some nearer 30%) APR - and over five years, you'll pay more than double the purchase price of the car.

There's a market for this of course. It's just only fair that you know the facts before you approach these bad credit car loan comapnies, because to them, the car is immaterial - it's the high priced loan they want to  sell you.

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