How to Buy a Car While Owing on a Repossessed Car

Losing a car to repossession can trap you in what might seem like a Catch-22. Your chances of successfully financing a new car get better if you can satisfy the balance you owe on the old one. But if you had a lump sum of cash at your disposal, you probably would have used it to save your auto from repossession in the first place. It can be an uphill battle to convince a new lender to take a chance on you before you've paid off the loan on the repossession, but its possible.

Instructions

1

Apply for a new credit card or a small loan immediately, preferably before the repossession appears on your credit report. This might seem counter-intuitive, but such small loans are easier to qualify for than auto loans, especially if you make a deposit with the lender to secure the credit card. Use the card or loan for the sole purpose of repairing your credit. Charge small items monthly and pay the balance off monthly.

2

Get a copy of your credit reports from all the major agencies. As soon as the repossession shows up on each report, write to the company. If something happened beyond your control to cause you to default on the loan, explain the situation. If something has changed since you defaulted on the loan, say so. For example, you might have been unemployed for a while, but now youre working again. The companies will make note of this on your credit report.

3

Contact a sub-prime lender and try to pre-qualify for a loan. Most national sub-prime lenders have websites, so you can usually do this online. Ideally, youll have made several credit card payments by the time you do this. Be prepared for a few extra fees, a higher interest rate and possibly having to make down payment of as much as 20 percent. Sub-prime lenders make their money by charging more for taking risks on people with poor credit. If such a lender approves you, you can begin shopping for a new car with your problem already remedied.

4

Go to a buy here pay here dealership if sub-prime lenders deny your application for an auto loan. Metropolitan areas usually offer several of these to choose from. They generally will not run your credit if you provide proof of income. You wont make your payments to a lender but directly to the dealership, usually on a weekly basis so the dealer can take the car back relatively quickly if you start missing payments.