Why a used car inspection is one of the best things buyers with damaged credit can do for success during an auto loan.
What we know
In a previous blog post we noted that over the past five years the price of the average new car has increased while the paycheck for the average American has either decreased or remained the same.
We also noted that captive finance companies of the auto manufacturers as well as banks and credit unions have responded to this by offering extended loan terms of as much as 72 and 84 months with as little as no money down.
And while this scenario is generally effective for car buyers with perfect or even good credit, it doesn't really work for borrowers with bad credit.
The reason for this is threefold:
- Even if subprime lenders offer extended loan terms, longer loans make it more difficult for buyers to trade out earlier for a new loan at a lower interest rate
- Because of the increased credit risk, most high-risk lenders require a minimum down payment of 10 percent or $1,000, whichever is less.
- With new vehicles depreciating faster, buyers with problem credit pay more for this depreciation with the higher interest rates charged by these lenders
The obvious solution for credit-challenged buyers is to pick a used car. But this choice comes with its own issues as most used cars lack the advantage of a new car warranty. And while used car buyers can check the history of a vehicle using services such as Carfax or Experian's AutoCheck, these reports normally depend on outside sources for their accuracy and therefore don't always reflect the true condition of a vehicle.
In addition, even if the vehicle history report is accurate, there is no way that it can show the current condition of any vehicle - including all of its component systems.
So what can buyers do to be sure the vehicle they're buying is actually what it's represented to be?
Used car inspections
While a vehicle history report is certainly a good first step - it can help buyers with bad credit eliminate vehicles with reported accident and water damage as well as odometer tampering - it can't possibly be as accurate as a thorough pre-purchase inspection.
In this case we're talking about an actual physical inspection of the vehicle performed by both an ASE Master Technician as well as a Collision Repair Specialist.
The technician will check out all the major mechanical components including the engine, transmission, drivetrain, electrical and electronic systems, suspension and steering as well as the brakes drive axles and the wheels and tires. The Collision Repair Specialist will inspect both the interior and exterior of the body for wear and tear as well as structural and non-structural analysis and damage repair.
There services are offered by both individuals as well as inspection service companies. Many of these companies offer to do it not only at their facilities, but on-site as well.
One more thing: if the seller doesn't give permission to have this done, it's probably best to just walk away from the deal.
As we see it
Many borrowers with bad credit choose a used car because it's affordable while allowing them to take out a car loan for a shorter term so they can either refinance it or trade it in sooner for a loan with a better interest rate. But picking a used car also means it's important that the vehicle is actually what the seller represents it to be and the only way to be sure is by having it inspected.
Another tip: Auto Credit Express matches consumers with troubled credit scores, many of whom believe their only option is a tote the note car lot, with dealers that can offer them their best opportunities for a nice car with approved credit.
So if you're ready to establish your auto credit, you can begin now by filling out our online car loan application.