You are using an older browser version. Please use a supported version for the best MSN experience.

Car Salesman Confidential: Dealing With No Credit History

Motor Trend logo Motor Trend 10/24/2014 Mark McDonald

This is perhaps the most terrifying tale you will ever read on I know many of you will be shocked, horrified, and revolted by the gruesome details I’m about to recount. Some of you may even question the veracity of my story. But I swear to you, every word of it is true. I know because I witnessed it myself.


It all began on a chilly night in late October. Dead leaves scuttled across the parking lot, blown by a wind that had kicked up from the northeast. I was all alone out on “the point,” a corner of the dealership where the salesmen congregate, when a pale, middle aged woman in dark clothing appeared at my side, seemingly out of nowhere, saying she wanted to talk to someone about buying a car. I remember wondering where she had come from, because the lot was empty and I hadn’t seen a car pull up. She must’ve walked to the dealership or had someone drop her off, I told myself. However she got there, a sale’s a sale, so I took the mysterious woman inside to do a proper “needs analysis.”

Her name was Badenov. Natasha Badenov. She was 55 years old, from the “Old Country,” and a recent widow. All her life her husband, Boris, a successful businessman, had taken care of her. She had never had to work and always paid in cash for whatever she needed. “That’s just the way we were raised,” she said to me in her broken English. “My father didn’t believe in borrowing or lending money. He didn’t like to be, how you say, on the hook. And that’s the way I am, too.”

An admirable philosophy, you might say. The only problem was, Mrs. Badenov’s car had just died and her life savings had been so depleted by taking care of Boris in his final days that she didn’t have enough money left to buy a new one. For the first time in her life she would need a loan. So I gave her a credit application and let her fill it out. When I went to the desk and handed my Finance Manager the app, it didn’t take him long to ascertain what I already suspected. “Who was that strange woman sitting at your desk?” a passing salesman asked. “One minute I walked by your office and she was there . . . the next minute, she was gone!”

“That’s because she isn’t a woman,” my F&I manager replied. “She’s a ghost.”

His words were punctuated by a crack of thunder. Lightning flashed. And somewhere in the distance, I swear I heard the howl of wolves, followed by the voice of George Hamilton as Dracula, yelling out a window . . . “Children of the night, shut up!!”

Okay, cut! Back to reality. My customer hadn’t vanished into thin air. She had merely gone to the bathroom. And she was very much a real woman. But she was also what we in the car business call a “ghost,” meaning a person with no credit history. Once she got back to my office I had the unpleasant task of explaining to Mrs. Badenov the ugly reality of financing a car for the very first time.

Car Salesman Confidential 1024 680 Orange And Black For Halloween© Provided by MotorTrend Car Salesman Confidential 1024 680 Orange And Black For Halloween

The fact is, we live in a credit based society. And without any kind of credit history at all, it’s very difficult to buy a car-- if not impossible. Even if you’re a responsible 55 year-old, it’s hard to get a lender to loan you twenty thousand dollars. The reason is, there’s no way to know if you’ll pay it back. Your credit history, which is a record of your past behavior, is used to predict future behavior, and assess the risk in loaning you money. If you’re 19 years old and you’ve never financed a car before -- or 55 and you’ve always paid cash-- you have no history. Which leaves the lender without any way to assess the risk-- and usually leaves the First Time Buyer without a car.

What’s the solution? Well, there are four basic ways around the problem of no credit history. One is a co-signer. Another is money down. The third is to take advantage of a manufacturer’s First Time Buyer program. The fourth is to have a little patience and build up your credit history over time. And by the way, all of these solutions assume you have the most important thing of all when it comes to get financed: a JOB, and sufficient income.

Co-signers. A co-signer is someone who agrees to sign on the dotted line with you. In essence, their credit history is used in lieu of your own. The way a lender sees it, the co-signer is there to make the payments if you don’t. For that reason, they prefer a co-signer who is a family member or, better yet, a family member who lives in the same household. The good news is, having a co-signer will allow you to build up your own credit so that the next time you buy a car you won’t need a co-signer. The bad news is, there is some danger in being a co-signer. If you’re the co-signer and your darling nephew doesn’t make the payments on time, your credit will be damaged. So if someone asks you to co-sign, think long and hard about the risk. If the person you’re trying to help doesn’t pay, you’re the one left holding the bag.

Money Down. Money down will cure just about anything when it comes to buying a car. If you don’t want to go the co-signer route, it may be possible to obtain financing if you put a sizable amount of money down. And when I say “sizable’ I mean as much as 30-40% of the total amount you want to finance. So if that’s $15,000, you’re talking $6000. Obviously, most first time buyers don’t have that kind of cash, so they may still need a co-signer.

First Time Buyer Programs. Many manufacturers have First Time Buyer Programs, and they’re a great thing. But most of them are linked to education. You have to have just graduated from college, or are about to graduate, and you sometimes need to have a job in the field that you got your degree. These programs are explained in detail on the manufacturers’ web sites.

Create a History. What I would suggest to any First Time Buyer is, don’t wait until the day you start shopping for a car to start thinking about how to finance it. If, for example, you’re planning on buying a car after graduation next year, start building your credit history now (or at least six months in advance). How? Get a credit card (or two). Don’t go wild with it. Just use about 10-15% of your available credit, and always pay on time. By the time you start shopping for a car, you may just be able to do it on your own.

What happened to Mrs. Badenov? Well, unfortunately, I wasn’t able to sell her a car that night. However, she was able to go to her bank and get a small loan to cover the cost of repairing her car. Once that’s paid off, hopefully she’ll have established enough credit to buy a car on her own. Buying your first car can sometimes be a harrowing experience . . . but knowing the dangers and preparing yourself in advance can take most of the fear out of it!

More Car Salesman Confidential:


More from Motor Trend


image beaconimage beaconimage beacon