There's a minimum credit score needed to finance a car, but it will vary from lender to lender. When it comes to buying a car, most lenders look at your FICO credit score to determine what you qualify for. FICO scores range from 300 to 850, with 300 being a poor credit score, and 850 being excellent. The general rule of thumb is the higher your credit score, the better off you'll be. But, not everyone can have perfect credit, and imperfect credit can make financing a car more difficult.

A big factor in determining what credit score you need depends on the type of car you want to buy. If you want a brand new car, lenders will want to see that you have good to excellent credit. But if you fall in the fair to poor range, you'll most likely need to consider buying a used or certified pre-owned vehicle. Buying a used car is more cost-friendly overall, and, in the future when your credit improves, you can choose to refinance or purchase a newer car.

If you have bad credit or little to no credit, many lenders may require you to have a cosigner, but there are ways to finance a car without a cosigner. There are subprime lenders who specialize in helping bad credit car buyers get the financing they need. Each subprime lender will offer different loan programs and rates, and consider factors outside of your credit score. So, even if you have a credit score of 500, the good news is you may still be able to finance a car if you work with a subprime lender.

There are a lot of requirements for an auto loan to be prepared for, and there can be even more qualifications to meet if you're struggling with credit issues. Though all requirements will vary by lender, the basics, like being 18 years of age, having a valid driver's license, and being a legal resident of the US, typically remain the same.

Requirements for a subprime auto loan get a bit more specific. You'll need to provide proof of your identity, income, and residency, as well as provide proof of a working telephone and a list of references. Some of the specifics typically include:

• $1,500 to $2,000 of monthly pre-tax income from a single source and a recent pay stub to serve as proof of income.

• Six months on a current qualifying job, with at least three years of employment history.

• A utility bill in your name for the address listed on your application to serve as proof of residence.

• A phone bill to serve as proof of having a landline or contract cell phone from a national carrier in your name. No pre-paid phones qualify.

• A list of six to eight personal references complete with names, addresses, and phone numbers.

The one thing you won't need with a subprime lender is perfect credit. These lenders are specially qualified to work with people who have poor credit, no credit, and even bankruptcies on their credit report. Subprime lenders only work through special finance dealers. Since you can't go out and get a direct loan from them, this is where we come in.

At TheCarCreditExperts, we specialize in helping people who are struggling with their credit by connecting them with local special finance dealers that have the right lenders available to help them get financed.

When you go to a dealer or subprime lender for bad credit auto financing, you'll almost always be required to put money down. The only time you'll typically be able to put zero down on a loan is if you have excellent credit.

If you're considering a dealer that doesn't run your credit or require money down, you're looking for a buy here pay here (BHPH) dealership. BHPH dealers are in-house financers, and aren't associated with banks or other third-party lenders. When you go to a BHPH dealer, you'll purchase the car, sign the papers to the loan, and drive off the lot all in one sitting. For bad credit car buyers, this is as close to getting an instant decision on a car loan as it gets.

Before you head to one of these dealers, there are a few things to be aware of. The cars that these dealers have on their lots are typically older, high-mileage vehicles. This doesn't mean they're in bad shape, it just means you won't find a brand new vehicle. Instead of running your credit, they'll use your income as the main source for financing qualifications. And, depending on the BHPH dealer, they may still require a down payment. Finally, you'll usually need to make payments in person on a weekly or bi-weekly schedule. If you miss these payments, they can report them to the credit bureaus and be quick to repossess the vehicle.

While the process of buying a car at a BHPH dealer is quick and convenient, they should be viewed as a last resort option. Most of these dealers don't report monthly payments, and if they do, it's only your missed payments. This means a loan from a BHPH dealer can't help you improve your credit score.

The amount of a down payment always depends on your individual situation, and only your lender can say for sure what they'll require from you. The general rule of thumb, if you can afford it, is to put down 20 percent of the vehicle's selling price. If you're financing through a subprime lender, they typically require $1,000 or 10 percent of the car's selling price, whichever is less.

Having a down payment when you purchase a vehicle shows your lender that you're invested in your auto loan. In fact, studies have shown that borrowers who make a substantial down payment are more likely to successfully pay back their loan.

But, no matter the amount, having a down payment is one of the best things you can do for yourself when it comes to auto financing, especially if you're dealing with less than perfect credit. Having money down reduces the amount you're financing, which saves you money in interest charges. It can also significantly reduce the time your vehicle spends with negative equity, which occurs when the car is worth less than you owe on the loan. Keeping equity in your vehicle is important down the road when it's time to sell or trade in your car.

You can trade in a car on a bad credit auto loan to use as a down payment, but the value of your vehicle compared to what you owe on it makes a huge difference.

Most bad credit lenders require a minimum down payment of $1,000 or 10 percent of the car's selling price, whichever is less. Your trade-in can be considered to meet this requirement if it's paid off or you have equity in it, but negative equity is a different story.

When you trade in a car, a dealer will appraise it and assign it a value. If the vehicle is paid off, this is the amount you can use as a down payment toward your next vehicle. If you still owe on the vehicle, the amount of trade equity you have can be used.

Trade equity is the difference between what a vehicle is worth and how much you owe on it. Having equity means the value the dealer is willing to give you is more than the payoff amount on your loan. For example, if your car is valued at $6,000 but you still owe $4,000 on its loan, you have $2,000 of trade equity you can use as a down payment. If you don't have enough trade equity to meet the down payment requirement, you can combine its value with cash.

However, when you owe more on the loan than your car is worth, you have negative equity, which can complicate the situation. For example, if you still owe $6,000 on your loan but your vehicle is only valued at $4,000, you have $2,000 of negative equity. In this situation, you may be asked to pay off the negative equity with cash, and you'd still need to come up with the money to meet the down payment requirement.

In some cases, the lender will allow you to roll the difference over into your new loan. Keep in mind this increases your monthly payments and results in you paying interest charges on the negative equity, so it's a last resort option that's best avoided.

You can absolutely trade in a car with a loan on it, but any money you get has to be used to pay off your current lien before anything else. You won't have to handle this – your dealer will take care of everything involved with paying your old lender and getting the title to the car. However, paying off your existing loan is easier if there's equity in your vehicle.

Equity is the difference between the actual cash value of the car and the amount you owe on the loan. If you owe less than the car is worth, there is equity. On the other hand, if you owe more than the car is worth, you have negative equity.

Negative equity, also called being “upside down” or “underwater,” puts you in the position of having to pay the difference between the amount you get for your trade-in and how much you owe. This amount can be paid out of pocket, or rolled into your new loan. Be aware that rolling any additional amount into a new loan isn't always an option, and it'll end up costing you more in interest charges over the term of your loan. If you have negative equity in your vehicle, you may want to reconsider trading it in until you're in a better equity position or you can cover the difference out of pocket.

Your chances of getting approved to lease a car with bad credit aren't very high, although they're better than they were a few years ago. Even if you were to qualify, leasing will be more expensive and you'll face more restrictions than drivers with good credit.

Leasing is growing in popularity because it allows car buyers to get into a new vehicle with the latest gadgets, payments are typically lower than finance payments, and the car is covered by a warranty the whole time. However, if you have bad credit, you likely won't be able to qualify for those awesome lease deals you see and hear in advertisements.

If you're trying to lease a car with poor credit, you can expect to only qualify for a lower program tier – if you're able to in the first place. This limits the vehicles you'll be allowed to lease and makes it more expensive. You'll likely get a higher interest rate (called a “money factor” in leasing) as well, and may need to pay a security deposit (or multiple security deposits) up front, in addition to needing the first month's payment and typical fees.

Also, you shouldn't confuse a lease-to-own financing program with a traditional new car lease. While dealers that offer this include "lease" in the name, this type of financing results in you owning the car when you complete the payment schedule.

Lease-to-own programs, sometimes called rent-to-own financing, are similar to buy here pay here loans. Dealers that offer it typically don't use third-party lenders, so they won't check your credit. While this makes it easier for bad credit buyers to get approved, it also means the dealer may not report your payments to the credit bureaus so the loan won't help you improve your credit.

While it's typically hard to get approved to lease a car with bad credit, an alternative is to try to get a subprime auto loan through a licensed dealership. This is easier to qualify for than a lease, and you can get the car you need while also getting the chance to improve your credit.