What Approved Auto of America Does

Approved Auto of America is a used-car dealership network that finances vehicle purchases directly to buyers, rather than referring them to banks or credit unions. The company operates physical lots in multiple states and advertises that it works with buyers who have poor credit, no credit history, or recent financial problems. Instead of requiring a traditional loan from a lender, Approved Auto finances the sale itself — meaning the dealership holds the loan and collects payments from you.

This model differs from most used-car dealers, which typically arrange financing through third-party lenders. Because Approved Auto is both the seller and the lender, it sets its own terms, interest rates, and down payment requirements. The trade-off for working with buyers traditional lenders would reject is that interest rates are significantly higher, and the dealership retains a security interest in the vehicle until the loan is paid off.

Key Takeaways

  • Approved Auto of America finances car purchases directly through the dealership rather than through a bank or credit union, which means faster approval but higher interest rates.
  • The company targets buyers with poor credit or limited credit history, but charges substantially more in interest than traditional lenders would for the same vehicle.
  • You will need to provide proof of income, a valid driver's license, and proof of residence; down payment amounts vary by location and your financial situation.
  • The dealership holds the title and a lien on the vehicle until you pay off the loan, and can repossess the car if you miss payments.
  • Before buying, compare the total cost of the vehicle (purchase price plus all interest) against what you would pay elsewhere, and read the contract carefully for payment terms and late fees.

How the Purchase and Financing Process Works

When you visit an Approved Auto lot, a salesperson will show you available vehicles and discuss pricing. Once you select a car, the dealership will ask for basic financial information: your income, employment history, and whether you rent or own your home. Unlike a bank, Approved Auto does not pull a traditional credit report in most cases — the company makes lending decisions based on income and ability to pay rather than credit score alone.

You will need to provide a valid driver's license, proof of current residence (a utility bill or lease agreement), and proof of income (recent pay stubs or a letter from your employer). The dealership may also ask for references or a co-signer if your income is borderline. Once the dealership approves you, you sign a retail installment contract, which is the legal agreement between you and the dealership. This contract states the vehicle price, the interest rate, the loan term (usually 24 to 84 months), your monthly payment amount, and any fees.

The dealership will also require you to carry comprehensive and collision insurance on the vehicle. You cannot drive the car off the lot without proof of insurance. The dealership typically does not arrange insurance for you — you must obtain it yourself, usually before you take possession of the vehicle.

Interest Rates and Total Cost of Borrowing

Approved Auto's interest rates are substantially higher than rates from traditional lenders. Rates vary by location and individual circumstances, but typically range from 18% to 29.9% annually, depending on the state's usury laws and the dealership's assessment of risk. A few states cap interest rates at lower levels, which affects what Approved Auto can charge in those locations.

To understand the real cost, calculate the total amount you will pay over the life of the loan. For example, a $10,000 vehicle financed at 24% interest over 60 months results in roughly $13,200 in total payments — meaning you pay $3,200 in interest alone. The longer the loan term, the more interest you pay overall, even though your monthly payment is lower. Before signing, ask the dealership for the total amount financed, the interest rate, and the total amount you will pay by the end of the loan.

Some Approved Auto locations offer incentives such as a discount for making your first few payments on time, or a reduction in interest rate after a set number of on-time payments. These programs vary by location, so ask whether your dealership offers them.

Down Payments and Monthly Payment Amounts

Down payment requirements at Approved Auto typically range from $500 to $2,000, though this varies by dealership and the price of the vehicle. A larger down payment reduces the amount you finance and therefore reduces the total interest you pay. If you have the cash available, putting down more than the minimum can save you money over the life of the loan.

Monthly payments depend on the vehicle price, the interest rate, the down payment amount, and the loan term. A typical monthly payment for a $10,000 vehicle with a $1,000 down payment, financed at 24% over 60 months, would be around $220. Payments are usually due on the same day each month. If you miss a payment, late fees explore — typically $25 to $50 per occurrence, depending on the contract terms.

What Happens If You Miss a Payment or Default

The retail installment contract gives the dealership the right to repossess the vehicle if you fall significantly behind on payments. Most contracts allow repossession after one or two missed payments, though the dealership may contact you first to arrange a payment plan. Once the car is repossessed, the dealership can sell it at auction to recover the loan balance. If the auction price is less than what you owe, you may be responsible for the difference — called a deficiency judgment.

If you know you will miss a payment, contact the dealership when ready. Some locations will work with you to defer a payment, extend the loan term, or arrange a modified payment schedule. Waiting until after you miss a payment makes negotiation harder. Repossession damages your ability to finance a vehicle elsewhere and can affect your credit report if the dealership reports the default to a credit bureau.

Comparing Approved Auto to Other Financing Options

Before committing to Approved Auto, compare the total cost against other options. A credit union or bank may offer a used-car loan at 12% to 18% interest if you have a co-signer or can make a larger down payment. Even with a slightly higher down payment, the lower interest rate saves you hundreds or thousands of dollars over the loan term. If you have a family member or friend willing to co-sign, exploring that option is worth the effort.

Some used-car dealers work with multiple lenders and can shop your process to find the lowest rate available to you. These dealers do not finance the sale themselves but instead arrange financing through a third party. The rates may still be higher than a credit union would offer, but often lower than Approved Auto's direct financing.

If you cannot afford a car right now, saving for a larger down payment or waiting a few months to improve your financial situation may allow you to may have access to for better terms elsewhere. The difference between 24% and 18% interest on a $10,000 loan over five years is roughly $1,200 — money that could go toward maintenance, insurance, or your next vehicle.

Reading and Understanding Your Contract

The retail installment contract is a legally binding agreement. Before you sign, read it completely and ask the salesperson to explain any terms you do not understand. Key sections to review include the vehicle description (make, model, year, mileage, and VIN), the purchase price, the down payment amount, the interest rate, the loan term, the monthly payment amount, the total amount financed, and any fees (documentation fees, dealer fees, or GPS tracking fees).

Check whether the contract includes a warranty or whether the vehicle is sold "as-is." Many Approved Auto vehicles are sold as-is, meaning the dealership makes no promises about the vehicle's condition and you cannot return it if something breaks shortly after purchase. Some dealerships offer a limited warranty (typically 30 to 90 days on the engine and transmission), so ask what coverage, if any, is included.

Also review the late fee amount, the repossession clause, and whether the contract allows the dealership to add GPS tracking to the vehicle at your expense. Some Approved Auto locations use GPS trackers to monitor vehicle location and disable the engine remotely if payments are missed. If this is included, the cost is typically added to your loan balance.

Frequently Asked Questions

Can I pay off my Approved Auto loan early without a penalty?

Most Approved Auto contracts allow early payoff without prepayment penalties, but you should confirm this in your contract before signing. Early payoff saves you interest, so if you come into extra money, paying down the balance ahead of schedule is usually a good financial move. Contact your dealership to confirm the payoff amount and whether any fees explore.

What if the car breaks down shortly after I buy it?

If the vehicle is sold as-is (which is common at Approved Auto), the dealership has no obligation to repair it or refund your money. You are responsible for all repairs and maintenance. This is why inspecting the vehicle carefully before purchase and asking about any warranty coverage is important. If a warranty is included, review what parts and systems it covers.

Will my Approved Auto loan show up on my credit report?

Whether Approved Auto reports to credit bureaus depends on the individual dealership. Some locations report all loans; others report only if you default. Ask the dealership whether they report on-time payments to the credit bureaus, since building positive credit history is one potential benefit of financing through them. If they do report, making all payments on time can improve your credit score over time.

What if I want to sell the car before the loan is paid off?

You can sell the vehicle, but the dealership's lien must be paid off from the sale proceeds before the title transfers to the new owner. If the sale price is less than what you owe, you will need to pay the difference out of pocket. Contact the dealership for the current payoff amount before listing the vehicle for sale.

Are there any hidden fees I should watch for?

Common fees at Approved Auto include documentation fees ($50 to $200), dealer fees, GPS tracking installation (if offered), and extended warranty costs. All of these should be listed in your contract before you sign. Ask the salesperson to itemize every fee so you know exactly what you are paying for and can decide whether each fee is worth the cost.