If you rebuild your credit, three years after your bankruptcy you can get a car loan at a good interest rate.  But you can also get steered into a bad loan by someone who claims to be doing you a favor.  So, with not-perfect credit, you need to shop–shop carefully–for your car loan.

I’m a Virginia bankruptcy lawyer, and I hate to see my after-bankruptcy clients get cheated.

Sadly, many people spend days and hours shopping for a car, and then just take whatever is offered on the loan.  That’s not smart.  Here’s what to do.

Shop as carefully for the car loan as you do for the car.

First, go to your own bank or credit union and apply for a car loan.  See what rate they will give you.

Then, when you go to a car dealership, tell them you have a loan offer from your bank and ask them if they can beat it.  Go with your best deal.

Car dealers make two kinds of loans.  Sometimes the car manufacturer is discounting loans in order to help the dealer sell the cars.  (Obviously no bank will give you 0.0% on a car loan–but the manufacturer, through the dealer, might. )  Those are great loans if you qualify.

Car dealers also place car loans with banks or finance companies.  The bank pays the dealer a commission or mark up on those loans.  Sometimes those dealer mark ups are very small; sometimes they are very big.  Those mark ups get passed on to you.

That’s why you want a loan from your own bank to compare.  If the dealer can beat it, that’s great.  Otherwise, go with your bank.

Three years after a bankruptcy, you can get a car loan and a good one.  But you can be a target for someone giving you a bad loan and telling you they are doing you a favor.  Don’t be fooled.

PS  Here’s a good article on the importance of taking the time to shop for your car loan.