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The Chances of Buying a Car with Bad Credit

The annual auto loan delinquency forecast from TransUnion predicts a rise in auto loans even for buyers with poor credit
The Chances of Buying a Car with Bad Credit
Our experience

For consumers with questionable credit searching for online car loans there was some good news late last year from TransUnion.

Here at Auto Credit Express one of the questions we get asked most often is “can I buy a car with bad credit?” The answer in most instances is “yes.” We should know because, for over two decades, we’ve been helping car shoppers with damaged credit find those new car dealers that can give these buyers their best opportunities for car loan approvals.

But in addition to matching applicants with car dealers, we also like to keep consumers up to date with what’s going on with auto lending – which brings us to the most recent annual forecast from TransUnion.

Auto loan delinquency forecast

Back in December, TransUnion released both its annual auto loan delinquency forecast as well as its auto debt per borrower forecast for the upcoming year and the results show that qualifying for an auto loan for consumers with credit problems should continue to get better.

According to TransUnion, “the ratio of borrowers 60 or more days past due will remain near record-low levels throughout 2013. In addition, the amount of debt for each borrower will also continue to trend upwards which is also “a sign that auto financing will continue to grow as new and used car sales increase.”

And while TU also expects the auto loan delinquency rate to rise slightly year-over-year from 0.36 percent at the end of 2012 to 0.37 percent by the end of 2013, the report also points out that “the level has dropped more than 50% since reaching its peak in Q4 2008 at 0.86%.

The outlook from TransUnion

“The national auto loan delinquency rate should stay relatively low throughout 2013 as the economy continues to improve,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “Macroeconomic factors such as the improving unemployment rate, median household income and housing prices are some of the primary drivers that lead us to a favorable forecast.”

Credit challenged car buyers

The forecast also noted that delinquency rates have managed to remain low even as more buyers with less than perfect credit enter the market stating that, “The low auto loan delinquency environment has persisted even as more non-prime, higher-risk consumers carry auto loan balances. In Q3 2011, TransUnion’s Industry Insights database found approximately 19.97 million borrowers with a VantageScore credit score lower than 700 (on a scale of 501-990) carried auto loan balances. This number increased to 20.66 million in Q3 2012.”

“It’s a real sign that the automobile market is on solid footing that even with more non-prime consumers carrying auto loan balances, we’ve continued to maintain a low national auto loan delinquency rate,” said Turek. “We believe this is happening partly because consumers are now valuing their auto loans even more than their credit card and mortgage loans; also lenders and dealers are putting even more emphasis on placing buyers in vehicles and loans that best fit their financial situation.”

Tips for problem credit buyers

For consumers with damaged credit, the overall lending market continues to improve as higher-risk auto lenders increase the number of loans originations to applicants with less than perfect FICO scores.

Here are a number of tips to improve the chances for an approval:

• Know at least one of your three credit scores as well as what’s in your three credit reports
• Plan for a 10 percent down payment either in cash or real trade equity
• Keep the loan term as short as possible
• “Placing buyers in vehicles and loans that best fit their financial situation” also means that car shoppers with damaged credit should choose a compact or midsize car and put off buying anything larger until after reestablishing their auto credit.

As we see it

Car buyers with imperfect credit now have an even better chance of getting approved for a car loan. But one of the biggest obstacles to this happening is the fact that not all new car dealers are willing to work with these kinds of buyers.

That’s why it’s good to know that Auto Credit Express helps people that have experienced difficulties with their auto credit find those new car dealers that can offer them their best chances for approved car loans.

So if you find yourself in this situation and you’re ready to reestablish your car credit, you can begin now by filling out our online car loan application.

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