The rise in wholesale used car prices could affect buyers with less than perfect credit.

Used Car Prices and Bad Credit

Manheim Reports Rise in Used Car Prices

The fact is that most buyers with problem credit will end up financing a used vehicle. Because of this, at Auto Credit Express we believe that current market trends could affect the budgets of many looking to buy a used car, especially many of the credit-challenged car buyers we work with.

Manheim Used Vehicle Value Report

In its most recent report, Manheim noted that consumer demand for used vehicles, in particular the price range most attractive to problem credit buyers, drove up the values for used vehicles during the second quarter of 2014.

The press released noted that "the Manheim Used Vehicle Value Index, a measure of wholesale prices adjusted for mix, mileage and season, increased 1 percent compared to the first quarter and rose 3.6 percent on a year-over-year basis." It attributed this rise to the"readily available auto financing at attractive terms has made it possible for more consumers to buy a vehicle and afford slightly higher-priced models."

Car Buyers with Credit Issues

The report also pointed out that "The sweet spot in the market has also moved upward in terms of price. In June, the strongest pricing and lowest relative supply of vehicles in the wholesale market was in the $12,000 to $15,000 price range. In 2013 and early 2014, the strongest pricing was often found in the $8,000 to $10,000 price range."

In particular, this means the pricing of two vehicle segments most attractive to people looking to buy a car with bad credit where affected:

  • Compact Cars, which have underperformed for the year, showed an improvement in the quarter compared to other segments. Wholesale values for compact cars ended June up 3.9 percent compared to the same period last year.
  • Midsize Cars, the largest segment of the market, showed a slight decline from the previous quarter but values still increased 4.8 percent from a year ago.

None of this is particularly good news for families with poor credit or people in need of bad credit car loans, since higher vehicle prices translate to higher monthly payments and increased interest charges.

There was, however, also some good news. The report stated that car loan delinquencies have remained low, while an expected increase in the number of vehicles coming off lease should ease prices, although modestly, later on this year.

The Bottom Line

Lacking a crystal ball, it's difficult to determine the right time to buy a used car. And while used car prices may moderate this fall, there's always the chance that, despite the availability of loans, interest rates could rise. In other words, the money saved in holding off for a better price could be offset by paying more in increased in interest rates.

One thing we do know: Auto Credit Express helps buyers with damaged credit find those dealers that can offer them their best chances for a car loan approval. So if you're ready, you can begin the process now by filling out our online auto loan application.