Problem Credit New Car Loans Increase

The latest report from Experian Automotive shows a rise in new car loans to consumers with less than perfect credit

Poor Credit Car Buyers

Problem Credit New Car Loans Increase

Here at Auto Credit Express we believe that the latest quarterly report from Experian Automotive contains some good news for applicants in the market for a bad credit auto loan.

State of the Automotive Finance Market

Experian Automotive’s latest State of the Automotive Finance Market report, issued earlier this month, analyzes automotive lending during the first quarter of 2014.

In a previous article covering the report, we noted the growing trend of stretching auto loan terms to help lower monthly payments and how this is something consumers with credit issues should avoid.

Today, we’ll be taking a look at a section of the report that dealt specifically with credit-challenged car buyers.

News for Subprime Finance

Under a heading titled “Subprime financing rises for new vehicles and drops for used vehicles,” the report had this to say about vehicle financing for buyers whose credit has experienced some bumps in the road:

Market share for nonprime, subprime and deep subprime new vehicle loans rose slightly in Q1 2014 to 34.34 percent from 33.68 percent in Q1 2013. For used vehicles, nonprime, subprime and deep subprime loans accounted for 64.2 percent of all loans, down 2.6 percent from 65.91 percent in Q1 2013.

The report also noted that in comparing the first quarter of 2013 to the first quarter of 2014, the average credit score for a used vehicle loan as well as the average monthly payment for a used vehicle both rose.

In addition, the interest rates for both new and used car loans also increased.

What This Means

Looking at the overall picture, we see both good and a bit of not-so-good news.

The good news is that taken as a whole, it looks as if subprime lenders are financing more new cars – a sign of increased confidence in the automotive lending market. On the other hand, interest rates are rising and, as a rule, subprime rates generally follow these types of market trends and will affect people looking to buy, or lease a car with bad credit.

Our recommendations to buyers with iffy credit profiles are what we’ve always stressed, including:

  • Know your credit scores and be familiar with the information in your credit reports before visiting a car dealer that accepts bad credit
  • Choose an affordable small or mid-sized car and with a payment of no more than 10% to 15% of your gross monthly income (the lower the better)
  • Keep the loan term as short as possible
  • The higher the down payment, the better a deal will score. Not including new car rebates or dealer cash, a down payment of 15% or more will increase the chances of an approval

The Bottom Line

The good news for car buyers with bad credit is that subprime lenders are increasing looking at new cars as a finance option. On the other hand, both new and used car interest rates are climbing which means buyers who are putting off a decision may end up paying more in interest charges.

At this point delaying that buying decision may not be in your best interests, so we have a suggestion: at Auto Credit Express our mission is to help buyers with damaged credit find those dealers for their best chances of an auto loan approval. So if you believe now is the time, you can begin the process by filling out our online auto loan application.

Posted on June 27, 2014 by in Auto Loans
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