The latest news from Equifax shows that buyers with problem credit have a better chance than ever to qualify for an auto loan
What we now know
Consumers with problem credit hoping to get approved for a car loan should be encouraged by the Equifax’s latest National Credit Trends Report issued earlier this year.
Here at Auto Credit Express we certainly believe this should be the case. We should know because for the past twenty years we’ve been helping car buyers with questionable credit find the right franchised new car dealers that can give them their best chances for car loan approvals.
We also believe it’s important that people with bruised credit understand the current lending environment before applying for a loan – which is why the latest news from Experian could prove to be especially encouraging.
On February 8th, Equifax released the latest National Consumer Credit Trends Report. At the time Equifax Chief Economist Amy Crews Cutts noted that “Sales of new cars and light trucks are rising steadily, though they are still well below pre-recession levels of roughly 17 million units.”
More importantly for credit-challenged car buyers, Ms. Crews Cutts went on to state, “Yet auto lending, including leases, is now back to pre-recession levels, driven in part by the very attractive interest rates being offered on these loans and a gradual increase in willingness to lend to less-than-perfect credit borrowers.”
The report, which specifically addressed car loans, made the following points:
• The most recent data shows that auto loans originated between January-November 2012 totaled $387.7 billion, a six-year high and representing nearly 46% of total consumer credit originated ($825 billion) for that same time.
• Total number of new auto loans originated between January-November 2012 was 19.9 million, an increase of more than 11% from January-November 2011 and matching a six-year high.
• New auto loans funded in November 2012 by banks, savings and loans or credit unions increased nearly 13% over November 2011 totals (749,800 to 857,300).
• For January-November 2012, auto lending to subprime borrowers (origination risk scores less than 640) has increased more than 18% year-over-year, from 5.1 million to 6.1 million.
High risk car loans
We are frequently asked by potential applicants, “Can I buy a car with questionable credit.”
The answer, taking the latest information into consideration, is that this could have the following effects on car loans for car shoppers with low credit scores:
• Lending continues to improve, although the interest rates for most subprime car loans probably won’t be dropping and down payments will still be required from most near-prime and lower lenders.
• With the increase in the number of buyers with weak credit requesting car loans, most higher-risk lenders can still afford to be selective in approving applications.
With that in mind, credit-challenged applicants should consider these tips:
1. Know your credit scores and what’s in your credit reports.
2. Pick an affordable car with a payment that’s below ten to fifteen percent of your gross monthly income (the lower the better).
3. The higher the down payment, the better. Not including rebates or dealer cash, 15% or more will increase your chances of an approval.
The Bottom Line
Car loan applicants with less than perfect credit ought to know that auto lending in the subprime sector is improving. The fact is that a credit denial from a conventional lender doesn’t mean the only alternative for most buyers is a BHPH dealer.
One other thing to keep in mind: at Auto Credit Express we specialize in helping credit-challenged buyers find car dealers that can give them their best opportunities for approved car loans.
So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.
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