New Experian Automotive report shows loan amounts increasing for new and used cars which is a change worth noting for credit-challenged consumers
The latest quarterly report from Experian Automotive shows that “the average dollar amount for both new and used vehicle loans reached all-time highs in the third quarter of 2014.”
The December 1, 2014 report found that “New vehicle loans in the 73- to 84-month range grew by 23.7 percent in Q3 2014 compared with the previous year” and that “The monthly payment for a new loan reached $470, up $12 from a year ago, while the monthly payment for a used loan reached an all-time high of $358, an increase of $8 over the same time period.”
Staying Within a Budget
“Car buyers tend to shop with a monthly payment in mind. As a result, we are continuing to see them turn to leasing and longer loan lengths as strategies to keep payments down and make vehicles more affordable,” said Melinda Zabritski, senior director of automotive finance for Experian. “As car values continue to reach new heights, these insights will help dealers, lenders and consumers become more aware of the options available to them to keep people buying cars, all while staying within their budgets.”
We should point out that Ms. Zabritski’s phrase “staying within their budgets” is even more critical for borrowers with bad credit, since subprime car loans come with higher interest rates. Before beginning the car buying process, consumers considering a high-risk loan should:
- Know their credit scores and the information in their credit reports
- Pick an affordable vehicle car and with a payment that is no more than 10% to 15% of their gross monthly income (the lower the better).
- Come into a loan with a ten to fifteen percent down payment, which will improve the loan-to-value ratio while increasing the chances of an approval.
The Bottom Line
With monthly payments and loan terms increasing, buyers with poor credit who understand their credit reports, know their credit scores and have at least ten to fifteen percent cash down and/or trade equity will have a better chance of getting their application for an auto loan approved.
So if you’ve done all this 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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