Poor Credit Sign and Drive Auto Loans

There is a reason consumers with less than stellar credit will typically not qualify for a sign and drive car loan program

Qualifying for cheap car loans

Applicants for auto loans with low FICO scores sometimes ask us if there is the chance they might qualify for a sign and drive car loan.

Here at Auto Credit Express we know why they ask this question (most of the time these loans require either little or no down payment) because we’ve spent the last two decades helping people with credit problems find dealers that can arrange for approved auto loans.

So why is it so tough to get a sign and drive loan if you’ve had credit problems?

Sign and drive

First of all, what is sign and drive? Sign and drive is a car finance program, but more specifically, the term generally refers to type of new car leasing program. Under a sign and drive lease, qualified buyers can begin leasing a vehicle by paying only the taxes, title and license fees. It’s called “sign and drive” because with most vehicle leases, buyers (lessees) are also required to make the first monthly payment plus a security deposit as part of the upfront fees charged at the time of delivery.

Signing and driving with low FICO scores

Practically all subprime auto loans – loans for people with poor credit – are for retail financing (buying), not leasing, a car. Not only is leasing rarely available to credit-challenged customers, the “sign and drive” lease option is typically available only to those customers with the best credit scores who qualify for leasing.

Knowing this, it’s easy to see why customers with credit issues don’t qualify for this kind of new car financing program.

Down payment problems

As was previously stated, one of the main reasons applicants with credit issues ask about a sign and drive program is because they don’t have enough of a down payment. In fact, nearly all high risk auto lenders require a down payment in the form of cash or real trade equity. This is done to increase the chances that credit-challenged borrowers will make regular and timely loan payments.

If you’re wondering why, look at it from the lender’s point of view: with little or no money invested – especially early in the loan when a vehicle is almost always worth less than the loan balance, it’s much easier for a buyer to just walk away. But with money invested in the car, it’s more likely those same borrowers will choose not to default and will continue to make loan payments. Because of this, most subprime lenders require a down payment of at least ten percent or $1,000, whichever is less.

The Bottom Line

If you’re someone who is about to begin the credit repair process, you shouldn’t be discouraged if you’re unable to qualify for a sign and drive lease.

While this particular program is not an option for buyers with credit problems, there is something that can be done that might lead to you qualify for one.

By taking the first step of applying for an auto loan with a higher-risk lender and making payments on time, you can establish your auto credit, raise your FICO scores and eventually qualify for one of those sign and drive programs.

In fact, Auto Credit Express specializes in matching consumers with poor auto credit with those new car dealers that can offer them their best chance for approved auto loans.

So if you’re ready to reestablish good car credit, you can begin now by filling out our online car loans application.