Subprime Car Loans: Why You Shouldn’t Dismiss a Customer with Less than Perfect Credit

It’s easy for auto lenders to overlook an important segment of car buyers; those with imperfect credit. After all, that credit history tells the complete story of an applicant’s financial situation along with their willingness and ability to pay back the loan, right? Well, not exactly. It turns out applicants for subprime auto loans could be the perfect pool of buyers and applicants you never knew you needed.

A Credit Score is a Snapshot in Time

First, consider that the credit score you pull on your applicant is just a small picture of the person behind it. Nearly everyone has had the misfortune of missing a payment, and often, it’s as easy as losing track of a due date and forgetting to pay it later. Other times, the issue could be with the creditor, such as a downed website or an error in submitting the payment. Once a payment is considered “late,” it takes a true miracle to get the credit bureaus to remove it. Even if they do agree and decide to remove it, it could take months for it to disappear from the report.

Other factors in the credit score can include things such as credit inquiries, which lenders consider to be an indication of a borrower’s worthiness. In truth, however, the borrower could have been shopping for a low interest rate debt consolidation or zero interest credit card as a show of financial awareness and maturity. If the rate offered doesn’t make good fiscal sense or the credit limit wasn’t high enough to consolidate, the borrower would be ill-advised to accept it. That mark, however, lives on for two years whether the loan or card was accepted or not.

Additionally, It’s estimated that one in five Americans have errors on at least one of the credit agencies’ reports. It’s easy to understand why looking beyond the credit score may be necessary for your subprime borrowers.

Not All Credit Worthy Consumers Have a Credit History

It’s ironic that some of the most financially responsible people have no long-term established credit history. These are the smaller pool of borrowers that tend to live well within their means, frequently spending cash instead of using credit cards or taking out loans. While their credit scores say “no,” these people are more than willing and financially able to pay back an auto loan.

Bankruptcies Don’t Necessarily Mean Irresponsibility

It’s tempting to disapprove an applicant because of a past bankruptcy, but these borrowers may still be a great fit for a subprime auto loan. Bankruptcy is not an easy decision to make so always consider the factors that played into the decision. Was it unexpected medical bills? Was it because of a messy divorce? Was there a catastrophic event in the applicant’s life, such as the loss of a business or other economic downturn? A bankruptcy six years ago doesn’t always mean an applicant should be automatically disqualified for a loan.

The Benefits of Offering Financing to Subprime Car Loan Applicants

Reaching out to those with less than perfect credit scores may sound risky, but it can ultimately benefit your bottom line in several ways.

“Word of Mouth” Advertising

Per a 2021 report on, 20% of Americans have subprime credit scores. For these consumers, finding an auto dealer who is willing to work with them is rare. They tend to remain very loyal to these dealerships, and share their experiences in online reviews as well as within their personal friend groups. This means you will be reaching a much wider customer base from all over the credit scoreboard, including prime buyers.

Sets Your Dealership Apart from Others

Any dealership can cater to those with great credit scores, but by positioning yourself as working with subprime applicants, you are setting yourself apart from the competition. You will benefit from an increased customer base that other dealerships overlook.

Attract More Customers

Offering loans to customers with less than perfect credit will increase auto sales for your dealership, since you’re giving these borrowers options they will largely be unable to find elsewhere.

Don’t Automatically Discount a Subprime Borrower

Your customer is more than a credit score. Your decision to finance their auto loan should be based on other things, such as work history, down payment amount, and proven income. By offering flexible payment plans for a wide range of credit scores, you will position yourself as a reliable dealership, willing to work with customers other dealerships ignore.

Bay Motor Finance, in partnership with Bay Country Finance, will work with your customers to give them the financing they need, getting them on the road with increased approval odds and a fast approval process. Contact us today and let us help you help your customers.