Used Car Service Contracts for Car Buyers with Credit Problemsby Steve Cypher on Monday, January 14th, 2013
Often for car buyers with less than perfect credit the few dollars more per month extra for a used auto service contract can mean a great deal when it comes to peace of mind and successfully reestablishing auto credit
What we think
Purchasing service contract as an add on to high risk car loans can often be a smart move.
At Auto Credit Express we know this because for over twenty years we’ve been helping car buyers with problem FICO scores find dealers that can give them their best opportunities for approved auto loans. But for consumers with poor credit on limited budgets, our experience has shown us that one of the keys to successfully completing subprime auto loan financing is avoiding large unexpected repair bills.
Not coincidentally, this brings us to today’s topic which is auto service contracts, sometimes mistakenly called extended car warranties.
Choosing the right car
Most car shoppers that have bad credit will decide on a 2 or 3-year-old used car rather than a new one. In most cases it’s because these vehicles are less expensive. But this decision also makes sense for a couple of other reasons:
1. New cars typically lose between 20% and 40% of their retail value in the first two to three years of ownership, which is what makes a two to three-year-old car that much more affordable.
2. With new vehicle quality is at an historic high, used cars are more reliable than ever.
But even given this kind of reliability we believe that buyers, especially those who are credit-challenged, should at least consider purchasing an auto service contract.
Car service contracts
An auto service contract is essentially an insurance policy. In this case you (the owner) are betting that something will go wrong mechanically with your car while the warranty company (the insurer) is betting that it won’t. Which bet would you rather take?
There’s one other thing to consider. Newer used cars may be more reliable, but at the same time they’re also more complex. Black box engine electronic engine and vehicle systems make the new generation of vehicles more fuel efficient and safer. But at the same time if something goes wrong, these complex systems can be expensive to replace, since in most cases they can’t be repaired.
And one more thing: just about everyone finds it easier to budget an additional $25 to $35 a month rather than pay $300 or more – with no advance notice – for repairs to get their vehicle running again, especially if they’re on a budget.
In many cases if these people are unable to afford these repairs, they are often forced to either take out a loan for a second car with a BHPH dealer or take public transportation.
All too often these situations lead to repossession since no one wants to make payments on a car they can’t drive.
As we see it
The tighter the budget, the more important it can be to avoid unexpected vehicle repair expenses. That being said, if you’re planning on using a subprime auto loan for credit repair, you should take a moment to consider an extended car warranty.
Something else you should know: Auto Credit Express specializes in matching applicants with auto credit issues to dealers that can offer them their best chance at getting auto loan approvals.
So if you’re ready to begin that process, you can start it now by filling out our online auto loans application.