According to the latest report from Edmunds.com, some of the best used car bargains to be found on dealer lots are affordable enough for borrowers with less than perfect credit.
Financing used cars with bad credit
For credit-challenged car buyers, one of the keys to successfully reestablishing their credit and successfully completing a car loan is picking the right kind of vehicle to finance. For many borrowers this means choosing an affordable used car.
In most cases, this means choosing a subcompact, compact or affordable midsize car and, according to the latest report from Edmunds.com, these buyers can look forward to even better prices this year.
Edmunds' Q1 2015 Used Vehicle Market Report
According to Edmunds' latest report that covers the first three months of 2015, shoppers looking for "near new" vehicles (a term Edmunds categorizes as five years old and younger) paid 2.8 percent less for a subcompact car and 2.0 percent less for a compact car than they did a year earlier. In addition, buyers considering a "near new" midsize car paid 1.6 percent less this year, compared to the same time period in 2014.
These price reductions stand in stark contrast to the used car market as a whole which, according to Edmunds.com analysts, experienced an average year-over-year increase of 7.1 percent.
"The recent surge in leases for small and midsize cars has spurred an avalanche of post-lease vehicles returning to the used car market, and with larger supply comes lower prices," says Edmunds.com Director of Industry Analysis Jessica Caldwell. "There's no sign that this surge in leasing will slow down any time soon, so shoppers can continue to expect prices of these cars to stay relatively low as they continue to flood the secondhand market in the coming months and years."
According to Edmunds.com, here are some of the better buys:
For some small used car models, the year-over-year price drops are more extreme. A near-new Fiat 500, for example, cost 12.5 percent less on average in Q1 2015 than it did during Q1 2014. Edmunds analysts found similar price drops for a near-new Toyota Prius c (-10.1 percent), Hyundai Veloster (-8.4 percent) and Volkswagen Jetta (-7.9 percent).
How Credit-Challenged Buyers Can Prepare Themselves
With this good news in mind, here are some tips for borrowers with tarnished credit:
- Choose a car with a payment that falls between 10% and 15% of your gross monthly income (the lower the better).
- The more you have in trade equity or cash for a down payment, the better. Not including new car rebates or dealer cash, 15% or more of the selling price will increase the chances of an approval.
- Finance for the shortest term you can afford – we're talking 48 months or less, if possible. This will allow you to trade out of the vehicle sooner and, if your credit has improved, into a new loan with a lower (possibly much lower) interest rate.
The Bottom Line
According to the latest market report from Edmunds.com, used subcompact, compact and midsize cars, many of which are ideal vehicles for credit-challenged borrowers, should be even more affordable this year. With this in mind, consumers who know their credit scores and reports and have a decent down payment might want to seriously consider pulling the trigger on a "nearly new" car.
One more tip: Auto Credit Express helps consumers like this find a dealer for their best chance at getting an approved car loan.
So, if you're serious about getting your car credit back on track, you can begin now by filling out our secure online car loan application.