There Are a Number of Things You Shouldn't Do if You're Trying to Buy a Car With Bad Credit

Car shoppers with bad credit unfortunately mean dollar signs for unscrupulous dealership staff trying to take advantage

Bad credit doesn’t have to block your next car purchase, but it does make you a target for high rates and hidden fees. Follow these guidelines to protect yourself and avoid common pitfalls when financing with less-than-perfect credit.

1. Never Rely on Verbal Promises

Handshakes and verbal assurances won’t hold up in writing. Always insist on a clear, written contract detailing every term, interest rate, loan length, fees and penalties—before you sign or drive off.

2. Don’t Drive Off Before Financing Is Final

If a dealer lets you leave with “approval pending,” you could be called back to accept a higher rate or extra fees. Wait for final lender approval and get it in writing to lock in your agreed terms.

3. Watch Out for Yo-Yo Scams

If a dealer demands the car back after you’ve signed a binding contract, that’s a “yo-yo” scam. Do not return the vehicle without legal advice. Report violations to the NC Attorney General’s Office for contract enforcement.

4. Arm Yourself with Rate Information

Know the current average APR for your credit tier before shopping. Obtain preapproval or a blank loan check from a bank or credit union to compare offers and negotiate from a position of strength.

5. Avoid Precalculated Interest Loans

Steer clear of loans where interest is calculated upfront, then spread across payments, these keep you owing heavy interest even as you pay down principal. Choose simple interest loans where each payment first covers interest then reduces principal.

6. Decline Prepayment Penalties

If a loan carries fees for early payoff or refinancing, calculate the cost before signing. High prepayment penalties can trap you in a bad rate and negate savings from future refinancing.

7. Resist Pressure to Add Cosigners

Dealers may urge you to recruit family members as cosigners to secure approval. If you need a cosigner, revisit your budget: a loan without one may be too large or expensive to manage safely.

8. Read the Tricks of the Trade

Dealer markup on financing rates can be substantial. Research common dealership tactics, like “spot delivery” or inflated add-on packages—and know your rights. Our companion article on dealership sales tactics covers these in depth.

9. Leverage Credit Unions for Better Rates

Credit unions often offer lower rates and transparent terms. Join a local NC credit union, many have partnerships open to consumers statewide—and ask about their auto-buying services that handle price negotiation and financing for free.

10. Check North Carolina Resources

• NC Attorney General’s Office: Report dealer abuses at ncdoj.gov/complaints or 1-877-566-7226
• NC Consumers Council: Find partnered credit unions and auto-buy programs at ncconsumers.org/credit-unions
• Better Business Bureau of NC: Check dealer ratings and dispute resolution at bbb.org

With due diligence, written contracts, rate comparisons and trusted financing partners—you can secure a fair deal even with bad credit. Don’t let hidden fees or high-pressure sales tactics drive you into a bad loan.