As inflation and the economic crisis have swept across the globe people´s finances have become tighter and tighter. Something that has made owning a car increasingly difficult for many. For example, according to the vehicle app, Jerry things have reached the point where car ownership is a stretch for the majority of Americans. Even households where the income is $100,000 a year would have to spend 25% of that income to buy and run 2 used cars.

Things are even worse for those who have ended up with a bad credit rating. For them, finding finance became all but impossible. But things are changing.

Finance companies need to lend or go out of business altogether. With so many of its potential consumers having bad credit files they have had little choice but to adapt. This means that gradually new types of loans and ways of owning cars that are tailored for those with bad credit ratings are becoming more widely available. Below is a summary of the main ones.

Bad credit car finance

The first option is bad credit car finance, which is exactly what it sounds like. A package that is specifically designed for those with bad credit scores.

They work in the same way as any other HP, PCP or leasing agreement does, except that they are typically considerably more expensive. The interest rates and the admin fees tend to be much higher than a regular car financing package.

Secured car loans

Most car finance companies offer loans that are secured against the vehicle. Should you fail to make payments, they repossess the car and sell it to pay off what you owe them. If after that has been done you still owe them money, which can happen, they will pursue you for that money.

Home equity car loans

Potentially it is also possible to use an asset such as your home as collateral for your loan.

This is risky because if you default your home can be sold to cover your debt. However, in certain circumstances, it may be worth considering.

Co-signed or guarantor car financing

Increasingly, car finance companies are accepting applications from people who have a guarantor. Someone willing to make the car payments should you ever find yourself unable to do so. Acting as a guarantor is a big risk, so finding someone to do it for you can be difficult. It is not an agreement that should be entered into lightly by either party.

Grant packages and charities

In some places, charities are stepping in to help people to own a car. They either cover some of the cost of buying and running the vehicle or act as guarantors to keep the interest rate as low as possible. While others source and repair used cars which ensures there is a decent pool of affordable vehicles to buy.

Examples of this include the Motability scheme in the UK, which helps the disabled and Kars4Kids which helps young people to get mobile. Increasingly, mainstream charities like The Salvation Army, Habitat for Humanity and the Red Cross also accept used car donations. Some are used to facilitate the work that they do, while others are made available to people who could otherwise not afford to buy and run a car.

Fractional car ownership

In countries like India fractional car ownership is becoming increasingly popular. Companies bring together groups of 4 to 12 people to co-own a specific vehicle.  Most are luxury cars, but there are Tatas, Skodas and Kias available.

To use it, each person pays a percentage of the cost of buying, running, and maintaining it. In the case of 4 people, the percentage is 25%, for groups of 12 it is 8.33%. The co-owners need to live within a 10km distance of each other. Credit checks are still carried out, but because the amount being contributed is low most people do qualify.

It is very similar to the fractional ownership schemes used to enable people to enjoy driving supercars for short periods. A president that means this way of owning ordinary cars is likely to gradually spread across the world.

There is no doubt that bad credit makes owning your own car more difficult. But as you can see it is still far from impossible.