Leasing or Buying a Car After Bankruptcy

Cars are no luxury in our society. They're a real necessity unless you live and work on a bus line in a major city, which few of us can boast.

Even though you’ve been through a bankruptcy, you still have options. You don’t have to get your wheels from one of those ‘we finance anyone’ thieves. Instead you can deal with a major dealership, in fact the larger the dealer the better.

Foreign cars are hot today. The most popular car in the country is the Toyota Camry. So Toyota dealers can afford to be a bit picky about who they sell or lease to. The salespeople over at your local Ford and GM dealer are much hungrier and more willing to work with you. And some of the cars aren’t all that bad. I’m not a Ford man, but the Ford Taurus is rather nice, not fancy but it’s comfortable enough and is well-made. The Sable is the same car with all the luxury trimmings. On the GM side the small Saturn is very well made and gets high marks by various rating magazines.

Once again, some auto financing firms will reject you out of hand if they know you’ve been involved in a bankruptcy. So do as you did before, leave that little check box after the question ‘have you ever filed bankruptcy’ empty. Tell the leasing manager your story and ask him what you should do. Unless he’s a
mindless company man, he’ll not only let you slide, he’ll arrange and orchestrate it. After all he wants that sale/lease deal to go through. It’s in his interest and he knows on which side of the bread the jam resides.

Large dealerships have more leverage with the manufacturer’s financing firm. Because they move more volume than the smaller dealers, they have more leverage when it comes to getting marginal applications (like yours) approved. And the best part here is that you’re financing your car through one of the most respected creditors on the planet which will give you a solid gold credit reference!

Be very careful however. The salesman may smile and process your application only to tell you later that he was forced to submit your application to a special high-risk creditor instead of the usual name-brand firm. This is a trap you don’t want to fall into. You’ll be paying more and you’ll get a lesser known creditor listing on your credit file which you should avoid. Make it clear that you’re only interested in financing through Ford Motor or GM Acceptance.

Instead, offer to make a down payment. It would be unrealistic for you to expect a no money down deal at this stage of the game. If you can get your hands on a total of $1,500, tell them you can come up with $750 or $850. Later if there’s a problem you can offer to come up with a larger down payment which should give the salesperson just what they need to close the deal.

Do not hand over your credit card or give them your social security number until you have an understanding with them that they are not to generate any ‘external inquiries’ on your credit file until the deal is almost complete. Too many such inquiries will work against you and you may have to visit two or three dealerships before you complete a successful transaction.

If a payment from GM was included in your bankruptcy, I’d forget them at least for now. Or if you ever paid a loan late to any division of GM the same would apply. They have long memories those computers.

Determine in advance how much of a payment you can afford, then stick to your guns. Don’t let them push you into paying more than you can afford as that will endanger your temporarily fragile financial situation.

Beware of dealers that sell cheap cars or cars that have just arrived in the market place from new manufacturers. These days KIA is offering to finance anyone who can walk in the door. But the problem is - their cars are not well respected. They offer a great warranty because their cars aren’t very reliable. Check with Consumer Reports and you’ll see what I mean. They’re financing is low-quality and you don’t want it on your credit file.

Sometimes a well-known bank will step into the high-risk market in the search for increased earnings. If your salesman mentions a special bank program, quickly ask the name of the bank. If you don’t recognize it instantly - steer clear unless you have to.

Ford and GM both have a short term lease for their higher risk customers. It’s only two years long. Perhaps that would be perfect for you as you’ll probably be in a position to purchase or lease a much better car by the time your lease expires. And if you make all your payments on time and return the car in excellent condition (they’ll charge you like mad if you don’t) you will become a ‘gold key’ customer and they will treat you like a king. You can have your pick of any car on the lot! The financing will be arranged in minutes, not days.

Keep in mind that GM now owns Hyundai and Ford now owns Mazda and each shares a common financing system. So your next car may be a nice foreign job.

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