Even without money, you can finance a used car through a dealer or outside bank (even if purchasing from a dealer). You may not need any money down, depending on your credit and bank determined value of the used car.
Considerations
The amount of money you are required to put down towards a used vehicle loan depends on your credit. Banks determine your risk on the basis of credit history and loan-to-value ratio. A loan-to-value ratio is the amount of money you can borrow based on the value of the car. Loan-to-value ratios are as low as 60 percent, which requires a significant down payment, to 120 percent, which allows you to finance the vehicle's cost, taxes, fees and an extended warranty without any out-of-pocket money .
Benefits
Purchasing a used car without money down can benefit you in the short and long term. Even without money, you can have a car immediately if your credit is good to excellent. Over the long term, if you pay your loan on time, you will establish good or better credit. Revolving loans, such as a vehicle or mortgage, can improve your credit score significantly. Many lenders allow you to pay off your loan early without penalty fees.
Warning
Consider your budget before shopping. If you have fair to poor credit, you may have a high interest rate, and in turn, a high payment. Some states allow up to a 29 percent rate for auto loans. In addition, if you are not putting money down, ask about GAP (guaranteed auto protection) insurance. GAP insurance covers the difference between the value of your car, as determined by your insurance company, and the amount you owe on the auto loan. Without money down, it is likely you'll need the extra coverage.
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