Guaranteed Car Loans: What Are They & Should You Get One?

Guaranteed Car Loans: What Are They & Should You Get One?

Posted on May 1, 2023

Drive around any city in North America and you’ll see signs for ‘guaranteed auto loans’ on billboards and outside some car dealerships. But what are they and are they a good idea?

We asked our auto loans team to explain what guaranteed auto loans are and whether you should get one. This is what they said:

Guaranteed Car Loans

Guaranteed auto loans are often legit. They aren’t always good value for money or even a good idea though.

They are another form of ‘buy here pay here’ or ‘no credit check’ auto loans. They are a type of dealer finance where the dealership themselves lend you the money to buy the car rather than going through an auto loans company.

Guaranteed auto loans are aimed at those with less than perfect credit. They offer a way to access finance without the fear of refusal, but will charge you for that privilege.

What to Watch For With a Guaranteed Car Loan

Guaranteed car loans differ in the same way standard car loans do. Different dealerships offer different deals and rates. There are a few things to look out for however.

Higher interest rates: Guaranteed auto loans can be risky for dealerships as they are designed for those with bad credit. Therefore, they will charge a higher rate of interest to access them.

You could be paying anything up to 30% interest on a loan like this so it’s well worth shopping around for a better deal than pay that much.

Less responsible lending: Some dealers will lend you more than the car is worth so you’re immediately upside down and will always be playing catchup. Other dealers will loan money to those without a steady income, putting them under financial stress.

While money lending is regulated, dealers aren’t always scrutinized to the same degree as loan companies.

Might not increase your credit score: Many guaranteed auto loans will be internal between you and the dealership. The dealer won’t always report your payments to the credit bureaus so you get none of the credit building potential of a standard loan.

If you have less than perfect credit, that’s a serious downside as paying a loan is a great way to rebuild credit.

Scams happen: There’s a trick we know that happens occasionally where a dealer will offer a set interest rate over a set term, you sign paperwork and drive away the car. The dealer will then call a day or two later and say the rate you were offered wasn’t approved and the rate you’ll get is higher.

Don’t leave the dealer until the contract is signed and sealed and you should avoid this scam.

Our Recommendation: Avoid Guaranteed Car Loans

We strongly recommend avoiding guaranteed auto loans wherever possible. They are often expensive, can include unfair terms and rarely offer good value for the customer.

You might be much better off applying for a bad credit car loan with a recognized lender. You have more protections, the deal is set in stone and there are no shady practices.

We can help you find one if you give us a call.

Contact Unique Chrysler for help, advice and competitive St. Catharines car finance and leasing.