Car loans for the recently bankrupt

January 11, 2012 7:21 AM

I declared bankruptcy about 6 months ago. I have two small children. I need a new (to me) car. What are my options?

Chapter 7 bankruptcy (bad choices + medical bills + unemployment + usurious lending = shit sandwich). Never missed or been late on a car or house payment throughout - the bankruptcy was all about crippling high interest credit card debt. Wish it didn't happen but it did. Reaffirmed the old car afterwards (a 2006) and owe maybe another $2000 on it.

But the car is literally falling apart. It is a mysterious and frightening beast. I can't bear to drive my kids in it. So, clearly, a newer better car is needed, but how to get one that isn't going to be an absolute nightmare. I imagine that Drivetime would sell me one but it looks like the purchase price on those cars is literally THREE TIMES that of similar models, plus the highest interest allowed by law. That's nutty. I understand that I am going to get a bad deal, but is one THAT bad all that I can get? Will a regular dealership sell me a car?

I can maybe scrape up $1000 down payment, and I have the deathtrap to trade in. Central Texas, if you have specific recommendations.

posted by anonymous to work & money (22 answers total)

Are you a member of a credit union? They may be willing to lend you money for a car.

What kind of car do you have? What do you want?
posted by mareli at 7:30 AM on January 11

You might be able to get a car at a dealership. They work with all kinds of lenders, some of whom will take on a bad credit customer. I don't know if they can find financing for someone with a bankruptcy that fresh, but it might be worth a try. Just be upfront with the salesperson about your situation and they will let you know if they think it's possible or if it would be a waste of time to try. Don't be embarrassed, those guys have seen everything credit-wise.

When I had worse credit than I do now, I bought my car through JD Byrider. I've actually bought from them twice. Then the last time I needed a car I went to them, and they ran my credit and told me that my credit was good enough to buy from a regular dealer and they didn't want me to pay JDB's higher interest rate if I didn't have to. I was impressed that they were so honest and ethical about it... I had no idea, and would not have questioned whatever deal they gave me had they not said anything.

Buy-Here Pay-Here does cost more but when I did it I found my payments were within reason and the cars I got from JDB were very good cars.
posted by Serene Empress Dork at 7:41 AM on January 11

Be very careful about the buy-here pay-here places. Their model isn't always to sell cars, but instead to get as much money from people before the car is repossessed.
posted by procrastination at 7:45 AM on January 11 [2 favorites]

I agree with procrastination that you do need to be careful and check the reputation of Buy-Here Pay-Here places, but just wanted to stress that I've gone to JDB three times in two states and never had a problem.
posted by Serene Empress Dork at 7:57 AM on January 11

Are you also low-income? Are you in touch with any social services (unemployment office, food stamp program)? I'd ask any official person if they know about cars for low-income, any charitable organization that sells or gives cars to those in need. I'd also work my network - send an email out to all my friend saying that you need a car and if anyone is looking to sell or knows anyone who is, to let you know. You may be surprised who might be looking to sell and give you a deal. You may still need a loan. Even my '96 Honda with a lot of miles sold for over 1k (but not by much). Get an account with a local credit union if you don't already and go ahead and see if you qualify.

Plus, Craigslist and cash are a good combo. If you don't know much about cars see if you can find an enthusiastic friend to help you comb the listings for what looks like a good car. If you can borrow from a friend an extra 2k, and repay it with interest, I bet you could get something a little more reliable. Plus, you can turn around and sell your car and use that to make the first repayment. Those are things I would try.
posted by amanda at 8:04 AM on January 11

Yeah, just go to a smaller used car lot. Most of them are set up to deal with borrowers with less-than-pristine credit. You'll want to look at the terms carefully, and if you get a bad feeling about the contract, be prepared to walk away. But there are people doing legitimate business in this market. I'd just start shopping around, telling the dealer right away that you've got bad credit, and seeing what you can dig up.

Your biggest problem seem to be that trading in your current car won't relieve you of the debt you owe on it.
posted by valkyryn at 8:05 AM on January 11

But the car is literally falling apart. It is a mysterious and frightening beast. I can't bear to drive my kids in it. So, clearly, a newer better car is needed, but how to get one that isn't going to be an absolute nightmare.

Don't take any of this the wrong way, I don't have all of the information:

It's hard to imagine why a 2006 vehicle would be falling apart at a faster rate than it can be fixed, unless it's not getting required maintenance.

Cars are damned expensive, and if you're that poor, investing in another one may not solve your problems. Any used car that you get is going to require maintenance. Any warrantied car that you get is going to be killer expensive.

The cheapest solution is a buy a Chilton or Hayne's manual that will walk you through the basic maintenance of your car. If you learn more about your vehicle, you might be able to keep it in better shape. The more you know, the less likely the thing is to be a "mysterious and frightening beast."

Maybe it's not an option for you (it's not for me, so I get that) but relying more on bike/bus/walking can take some of the pressure off the vehicle's maintenance requirements and save money too.

Anyway I apologize if I skirted the question entirely, but I hate to see people unnecessarily sinking money into replacing vehicles that (maybe) don't need to be replaced. That's a VERY expensive security blanket.
posted by Stagger Lee at 8:15 AM on January 11 [23 favorites]

It's hard to imagine why a 2006 vehicle would be falling apart at a faster rate than it can be fixed, unless it's not getting required maintenance.

Exactly. What is wrong with the car? If you can scrape up $1000, you can fix almost anything wrong with that car short of a engine or transmission rebuild.
posted by narcoleptic at 8:29 AM on January 11 [1 favorite]

Stagger Lee said what I was going to say.

If you're out of Chap. 7 then you should be in better shape now than you were last year. A five-year-old car that runs is worth putting repairs into rather than replacing unless there is something seriously wrong with it. Your question doesn't say, it just says that it's literally falling apart. I don't mean to fight the hypo but this doesn't seem right to me.

I'd go to a mechanic that you trust and ask him whether your fears are realistic. Tell him your situation in terms of money, and run down your list of fears. Tell him you have small kids and you're worried about taking them on the road. Describe what is falling apart in the car. Ask him why each symptom is serious or not serious. If you're worried about getting ripped off, tell him that whatever repairs he recommends, you'll be taking it to another mechanic to have done.
posted by gauche at 8:32 AM on January 11

^ ... Good advice but at least buy him a six-pack (of whatever!) if you're not going to give him your business. His/her willingness to work for you will be magnified several times over thanks to this simple act of goodwill.
posted by RolandOfEld at 8:39 AM on January 11

I'd go to a mechanic you trust... If you're worried about getting ripped off, tell him that whatever repairs he recommends, you'll be taking it to another mechanic to have done.

Around here, Firestone will check over your entire car and give you a detailed list of recommendations with prices for around $20. Just let them know you only want the checkover and that you won't be getting any of the work done that day. They are fine with doing these kinds of check ups, I've even taken in a car I was considering buying to see if it had any mechanical issues.

I've never had them pressure me in any way to get the work done right away nor felt like they were just recommending stuff to get me to spend more money.
posted by Serene Empress Dork at 8:44 AM on January 11 [1 favorite]

Good advice but at least buy him a six-pack (of whatever!) if you're not going to give him your business. His/her willingness to work for you will be magnified several times over thanks to this simple act of goodwill.

I was assuming that the mechanic would charge you some fee (probably <$50.00) for their trouble. I probably shouldn't have assumed that.
posted by gauche at 9:03 AM on January 11

and owe maybe another $2000 on it.

This is really a big problem, because you're coming out of a bankruptcy and you are now going to have... two car payments? I'm with everyone else who says the smart thing to do is get a thorough repair estimate on this car, and then see if you can borrow the money to do the repairs.
posted by DarlingBri at 9:09 AM on January 11 [2 favorites]

A 2006 car is not old. Hell, I drive a 1997 model. Check cartalk.com for leads on a trustworthy mechanic, or just ask around. If you have been doing the bare minimum of a couple / few oil changes every year, and the transmission is in decent shape, the 2006 should have plenty of life in it. Any car loan you get after a recent bankruptcy will have credit card like interest rates. Having been through what you just went through, I trust you see the folly of borrowing a few thousand or more at 19% APR.

Your car could be the exception, but I'd lay 98% odds that repairing your car is the more cost effective option.
posted by COD at 9:23 AM on January 11 [1 favorite]

Everyone from Stagger Lee down to COD has said this obliquely, but I think it bears saying explicitly: You can't afford a new car. Even a new-to-you car.

If you put yourself into more debt buying one, you'll still owe money on the old one, and then you're on the road back to the horrible position you were in before you declared bankruptcy.

Work with a mechanic you trust and get everything you can possibly get fixed for that $1000 and spare yourself more bad decision-making.
posted by yellowcandy at 2:50 PM on January 11 [1 favorite]

I would contact the people at 722 and ask them what they have available. They specialize in just this type of thing.
posted by banished at 2:57 PM on January 11

Shortly after our bankruptcy we bought a minivan from a buy-here-pay-here dealership and have had nothing but a good experience. There were a couple times we were having trouble with the payment, but called them first and it was all good. Of course, our interest rate is way-high, and we ended up paying more for the van than we would have with good credit of course. As with doing business with anybody, do your homework first before agreeing.
posted by AzraelBrown at 2:59 PM on January 11

N-thing that a 2006 car is not that old. It's a mysterious and frightening beast? No, it's a car.

Does it run?

You "can't bear to drive your kids in it." Is it unsafe in any way? Or is this just some free floating anxiety?

I drive a 2004 car. It was an economy car when it was brand new. It has a few small issues that I keep an eye, and sometimes I complain that it's falling apart, but with a little maintenance, it's fine. Take it to a mechanic you trust, and see what you absolutely have to fix now and what can wait. Having a less than perfect car is part of having less than perfect finances.
posted by ablazingsaddle at 5:22 PM on January 11

Just as another data point to add to the Get It Fixed brigade, I'm still driving the 1998 car I bought new. I've been conscientious about maintenance and it's in great shape. Not having a car payment has given me a whole lot of flexibility I wouldn't otherwise have had. You only owe $2000 on this car? Then it will be paid off in a year or so and you'll be in a much stronger place financially. A 2006 car is brand spanking new and the last thing you need coming out of a bankruptcy is another car payment.
posted by mygothlaundry at 6:28 PM on January 11 [1 favorite]

I find the claim that your 2006 model year car is falling apart difficult to swallow. My family owns three cars, a 2007 that more or less still feels new, a 2004 that feels like its broken in and slightly worn, bit still works fine, and a 1985, that feels tired and a bit quirky but still far from"falling apart" ( it leaks power steering fluid and the A/C doesn't work).

You say "it is literally falling apart" which parts have fallen off of it? How many times has it left you stranded on the side of the road? If the answer to either of these is "none", or even "one", then you really need to reevaluate the state of your current vehicle and the "bad choices" part of your parenthesized reason for your bankruptcy.
posted by tylerkaraszewski at 7:29 PM on January 11

2006 car is not old. Can you be specific as to what's wrong with it?
posted by WizKid at 2:11 PM on January 12

I work for sub-prime lending. Trading out of this car and attempting to get a new one is not a very good idea. If you trade in the car and they realize it doesn't work right, they will give you a ridiculously small amount for it. Also, "new" used cars can break right after you get them, even if the dealer tells you the car is excellent. It's just the nature of used cars. If you are that unlucky, you would be in the same situation all over again. Lastly, the interest on the new loan is going to be astronomically high due to how recent your bankruptcy is. Someone in your situation would be getting around 28% where I work. Good luck!
posted by cobain_angel at 7:22 PM on January 12