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Used Car No Credit Title Problems

Consumers with questionable credit need to know how to avoid vehicles with title problems before signing on the dotted line for a car loan

What we know

A study conducted back in 2011 by Experian Automotive makes it clear that consumers with bad credit who finance used cars with subprime auto loans are at greater risk to be the targets of fraud than the average buyer.

Here at Auto Credit Express we are aware of this unfortunate statistic because for more than a decade we’ve been helping problem credit car buyers searching for online auto loans locate those car dealers that can offer them their best opportunities for loan approvals.

So why is understanding the exact condition of a used car so important?

Used cars

For most credit-challenged car buyers, choosing to finance a used car is typically in their best interests. That’s because, according to Consumer Reports, the average new car can lose up to 47 percent of its retail value over the course of just the first three years of ownership.

But buying a used vehicle also comes with the risk that its condition isn’t necessarily what the seller would lead you to believe. This problem is twofold: just like purchasing a new car, there is no cooling off period once the loan documents are signed. Additionally, most used cars, unlike new ones, and are not covered by state lemon laws with many sold “as is” and without warranties.

Title washing

If this isn’t bad enough, in some cases the title held by the seller only “clean” because the vehicle’s previous “branded” title was altered by re-titling it in another state in a practice known as “title washing.”

In other cases, used car buyers have unknowingly signed branded titles without realizing it.

So what does this mean for car buyers?

If this happens, these buyers, without realizing what they’ve done, could end up financing a used car with hidden damage. For car buyers with credit problems it goes beyond this as it could jeopardize their efforts at credit repair.

It’s also something that, according to Experian Automotive, does happen more often to buyers with poor credit scores.

Experian study

Back in 2011 an Experian Automotive credit trends study compared a vehicle’s history to loan performance. Here is what it found:

“…vehicle history can have a major impact on loan performance. The study found that more than 2 percent of the late-model used vehicles (model year 2005 and newer) had a negative vehicle history event (frame damage, salvage, odometer rollback, etc.), which can significantly impact the vehicle’s value.”

The study also found that “while these instances occur across all credit segments, more than 3 percent of financing outside of prime had negative vehicle history.” At the same time it also noted that “Vehicles with a negative history event also referred to as ‘brand’, also have a higher percentage of charge-offs for lending institutions.”

Buy used car no credit tips

There are at least three things that used car buyers can do to avoid purchasing a used car with a negative vehicle history.

1. Go to www.nicb.org and check the vehicle’s history using VINCheck (be sure to copy the VIN number from the vehicle’s VIN plate)
2. Order a vehicle history report from either Carfax or AutoCheck.
3. If the vehicle passes both tests, have it inspected by an ASE Certified Master Mechanic as well as a body and frame expert before making a buying decision.

The Bottom Line

The first step to successfully reestablishing auto credit is making any vehicle chosen won’t end up incurring hundreds or even thousands of dollars in maintenance costs due to a previous event.

It’s also important to note that even if a branded car turns out to be reliable, any vehicle whose title has been washed due to previous damage will be worth much less at trade in time as there’s an excellent chance that that damage will finally be uncovered. A vehicle like this could also reduce the ability to trade it in sooner, since there’s a good possibility there will be a negative equity situation for most of the loan term.

Another important thing remember: Auto Credit Express specializes in helping applicants with car credit issues find those dealers that can give them their best chances at auto loan approvals.

So if you’re ready to reestablish your auto credit, you can begin now by filling out our online auto loan application.

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