The latest auto delinquency report from TransUnion shows an improvement in the percentage of auto loan delinquencies during the second quarter of 2015 when compared to the same time in 2014.
Although more lenders are increasingly willing to work with credit-challenged borrowers, most are balancing this by requiring that borrowers have actual equity (cash down, trade equity) in these loans.
While new cars are generally becoming more affordable despite the slight dip in July, borrowers with tarnished credit would be smart to maximize their down payment while keeping both the loan term and payment-to-income ratio to a minimum. Typically this entails moderating their expectations and financing a very affordable car – at least until they’ve reestablished their credit.
Although the rise in median family income means that new cars are becoming more affordable, borrowers dealing with credit problems would do well to maximize their down payments while keeping both the loan term and payment-to-income ratio to a minimum. This means lowering expectations (at least until their credit is reestablished) and financing a more affordable car for a shorter term, rather than taking out a long-term loan on a more expensive vehicle.
Not all borrowers with credit issues, students or parents, will be given the option of financing a new car, but if they are and the approval is through one of the franchises listed above, they probably wouldn’t go wrong choosing any one of these “back to school” cars.
The three vehicles we’ve chosen from AutoPacific’s list are not only winners in their class, they represent affordable values with starting MSRPs of less than $18,000 – a price point that’s important to borrowers with credit issues.