How hard is it to finance a car after bankruptcy?

Most people seem to think that after filing bankruptcy, its next to impossible to obtain financing on a new car.  WRONG!  In many cases, its actually easier!  How could this be?

Once one gets a discharge, their debt to credit ratio is eliminated or drastically reduced.  Since this generally factors up to 1/3 of the total credit score, bad credit always improves.  Add the fact that the bank now knows you can not file for another 8 years and have no other obligations to pay, and you find that many banks actually want your business!   

Just last week, I referred my client to one of my auto people I do a lot of business with, and he got her 10.99% interest, no money down, and had her driving in 2006 beetle purchased at low blue book value within 2 days! Plus, she had not even received discharge yet!   

Typically, the best deals can be found based upon the following:

1) Car Payment equal to or less than 15% gross income
2) Within 2 weeks before or after discharge
3) W-2 employee
4) Used late model vehicle for sale at low blue book   

Generally, we are seeing interest rates averaging between 8.99% to 14.99%.  Just about any reasonable make, model, and color vehicle is available. But most importantly, the deals I am seeing are much better than the current deals the debtor currently has since the debtor is surrendering their “upside down” vehicle in most cases.  With bankruptcy eliminating all the debt and surrendering the upside down vehicle, the debtor is much better off with a new purchase of a vehicle at low blue book value.  This is far better than purchasing a brand new car since there is no “drive off depreciation!”  

So be sure to ask your attorney whether it makes sense keeping your old vehicle that is worth less than what you owe, when instead you can make a new purchase where you will not be upside down and probably end up with a better interest rate!  

Written by Michael Doan