A recent study by LendingTree posed a question: Just what used car brand would people stretch their budgets to afford? The answer may surprise you.
Planning to Buy Used in 2018
Looking at the survey, Lending Tree found that 27 percent of Americans plan to buy a vehicle this year. Using their own data from 2017, LendingTree combed through the numbers to discover if people are more likely to stretch their available incomes to buy particular brands.
Though the popular assumption suggests it should be a luxury brand, results showed quite the opposite. In fact, consumers who bought used luxury cars seem to have no problem affording them. So, what vehicle brands do people have the hardest time affording?
Buick topped the list, not because of their price, but because of the estimated percentage of the buyer’s monthly income the car payment takes up. According to LendingTree, the top six used vehicle brands people stretch their budgets to buy are:
1. Buick
- Average Estimated Price: $18,597
- Average Estimated Monthly Payment: $416
- Percent of Estimated Monthly Income: 10.9%
2. Chrysler
- Average Estimated Price: $18,497
- Average Estimated Monthly Payment: $440
- Percent of Estimated Monthly Income: 10.9%
3. Nissan
- Average Estimated Price: $18,231
- Average Estimated Monthly Payment: $405
- Percent of Estimated Monthly Income: 10.6%
4. Dodge
- Average Estimated Price: $22,290
- Average Estimated Monthly Payment: $454
- Percent of Estimated Monthly Income: 10.6%
5. Chevrolet
- Average Estimated Price: $20,930
- Average Estimated Monthly Payment: $437
- Percent of Estimated Monthly Income: 10.2%
6. Kia
- Average Estimated Price: $17,357
- Average Estimated Monthly Payment: $368
- Percent of Estimated Monthly Income: 9.7%
What’s Behind the Numbers?
Among the studied car makes, the data points to the fact that, on average, people who are in the market for the most expensive luxury vehicles spend less of their monthly income on them. People who are using the biggest chunk of their monthly income on vehicles aren’t people who are shopping for high-end sports cars. It turns out they’re people who are buying used vehicles like Buicks, Chryslers, and Kias. According to LendingTree, the non-luxury brands buyers were best able to afford were Mini and Subaru.
The reason these numbers stack up this way has to do with payment-to-income (PTI) ratios. PTI is calculated by dividing your estimated monthly car and insurance payment by your monthly pre-tax income. Lenders want borrowers to be able to make their payments, so it’s typical for a lender to set a maximum acceptable PTI ratio. Subprime lenders, in particular, usually cap a borrower’s PTI ratio at 15 to 20 percent of their monthly income.
“For most Americans, price and monthly payment are still significant deciding factors, as they are often searching for a vehicle to fit within a certain budget,” said Mike Ouyang of LendingTree’s auto division. “Used cars offer a huge price advantage and are great for those that [aren’t interested in] having the most current features.”
Ready to Finance a Used Car?
Luckily, 2018 is set to be a good year for the used car market, with a large pool of vehicles coming off lease. So, if you’re shopping for a used car, now is a good time to begin your search. Worried about poor credit standing in your way? You owe it to yourself to do everything you can to get the right lending from the right dealer. That’s where Auto Credit Express comes in.
We work with an extensive network of special finance dealers that have the lending resources available to assist people in all kinds of credit situations. Our service is simple and free of cost and obligation. Let us help you find a local dealer. Just fill out our online auto loan request form to begin.
