What to expect when buying a car with bad credit, Part 2

A recovering market
Gone are the days when practically anyone could stroll into a car dealership, plunk little or no money down and drive out with a new vehicle. But, "there are still a lot of financing options available and the landscape has improved from a year ago," says Eric Hoffman, a spokesman for Americans Well-Informed on Automobile Retailing Economics (AWARE: undefined, undefined, undefined%), an organization comprised of auto dealers and finance companies that aims to educate consumers about car financing.

If you belong to a credit union, check those rates first. Then see if you can get a better offer from a local bank or the dealer itself. "If you have less-than-stellar credit, shopping around is even more important because it will give you a broader gauge for what different financial institutions are willing to offer," Hoffman says.

An option for people with low credit scores that is gaining in popularity right now is the "buy-here, pay-here" market. Formerly known as "mom and pop" dealerships, buy-here, pay-here dealers generally require about $1,000 down and "stay in close touch with the customer throughout the length of the loan," says Jennifer Reed, editor of The Subprime Auto Finance News. Such dealers are more likely to finance people with bad credit, but "the customer is sometimes expected to make weekly or biweekly payments to stay current," Reed says. Some dealers will even align payments' due dates with customers' paydays, and many will also report good payment histories to credit bureaus, which can help borrowers improve their credit.

In 2010, more than 2.3 million vehicles are expected to be financed via buy-here, pay-here dealers, up from 1.84 million vehicles in 2009 and 1.32 million in 2000, according to CNW Research.

The person who takes advantage of subprime credit offers, such as those offered by buy-here, pay-here dealers, is "someone who is simply looking for transportation to get them to and from work and to do basic errands," Reed says. "They are not looking for something fancy, but instead are seeking a vehicle that meets their basic needs."