A new law that took effect last summer in California goes a long way towards helping buyers with damaged credit pick a vehicle without hidden damage for an auto loan
From what we have seen used car buyers – particularly those with problem credit – are particularly at risk to be targeted by unscrupulous sellers that sell used cars that have been either rebuilt or have suffered some other type of hidden damage.
We know this here at Auto Credit Express because for over two decades we’ve been helping borrowers with bad credit that have been searching for online auto loans locate those new car dealers for their best opportunities for auto loan approvals. These dealers are licensed as well as subject to the consumer protection laws in their respective states.
But this isn’t the case with all sellers so you can imagine how pleased we were last year to learn of a new California law will help consumers in that state avoid buying a used car with a branded title. In particular this should help borrowers with problem credit since a study conducted by Experian Automotive found that buyers with low credit scores face a greater risk of financing these types of vehicles.
The fact is that financing a vehicle with a branded title, could cost used car buyers a great deal more than the same model with a clean title.
Choosing used cars
For credit-challenged car buyers, used cars are a good choice for an auto loan. According to Consumer Reports, new cars can lose up to 47 percent of their value during the first three years of ownership. This means picking out a used car is both a smart and an affordable buying decision.
But buying used also carries the risk that the vehicle being financed might not be exactly what the seller stated it was.
Not long ago an Experian Automotive study revealed 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 report also mentioned that “more than 3 percent of financing outside of prime had negative vehicle history.” This means that borrowers with damaged credit are even more at risk for purchasing a vehicle with hidden damage.
Golden State used car law
For credit-challenged buyers living in California, assistance regarding this issue from a new law that took effect in July of last year.
While AB 1215 allowed auto retailers to raise documentation fees on retail purchases and leases, it also requires licensed dealers to run the VIN number of all vehicles they plan on selling through the National Motor Vehicle Title Information System to check if they have a branded title.
If the report reveals they do, a red window sticker must be affixed to each one warning buyers of this fact.
According to California Assemblyman Bob Blumfield, the bill’s sponsor, “Buying a car comes second only to the commitment that comes with buying a home. With working families striving to stretch their dollars in this tough economy, there couldn’t be a better time to help ensure that family cars are a good and safe investment.”
As we see it
Although the only guaranteed way to prevent buying a vehicle with hidden damage is having it thorough inspected by an ASE certified master mechanic as well as a body and frame specialist, the new California law is a important first step in informing potential buyers of possible serious vehicle damage.
Another good tip for borrowers with bruised credit: Auto Credit Express matches consumers, even those that believe their only option is a BHPH car loan, with dealers that can offer them their best opportunities for approved auto loans.
So if you’re ready to establish your car credit, you can begin now by filling out our online auto loan application.