You Can Buy a Car with Bad Credit

A report released yesterday by Experian Automotive on payments and loan terms also contained some good news for consumers with poor car credit
You Can Buy a Car with Bad Credit
What we found

Here at Auto Credit Express we’ve found that the reports from Experian Automotive, even those that don’t directly address the issues of poor credit buyers, often contain valuable information about higher-risk auto loans.

We also believe it’s important to pass this information on mainly because we’ve spent that past the past two decades helping car shoppers with questionable credit locate those franchised new car dealers that can offer them their best opportunities for approved auto loans.

Experian Automotive report

The March 5, 2013 report primarily focuses on average loan terms for new vehicles and the average interest rates charged on new and used vehicle loans during the fourth quarter of 2012.

It also goes on to compares these loan terms and rates to the fourth quarter of 2011. But neither of these comparisons has much to do with credit-challenged car buyers who typically must deal with shorter loan terms and higher-than-average interest rates. That being said, buyers with credit problems may be asking themselves why we brought this up in the first place.

We’re glad you asked, because one of the questions we have to answer most frequently is “Can I buy a car with bad credit?”

You can buy a car with bad credit

Reading through the report here is the first comment we found:

“Overall, Q4 2012 was a very favorable time for consumers to buy a new or used vehicle in terms of overall monthly payments,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “Lower interest rates and longer loan terms made it easier for consumers to finance a vehicle while keeping their payments affordable. This, combined with the fact that more vehicle loans went to consumers with credit outside of prime, portends a vital and healthy automotive market.”

The fact that more loans are being made to applicants with less than perfect credit is important – as well as being really good news to consumers that currently find themselves with low credit scores.

Other report points

The report went on to state that “More consumers also were able to obtain financing in Q4, as average credit scores for both new and used vehicles dropped. For new vehicle loans, the average consumer credit score was 755 in Q4 2012, down six points from Q4 2011. For used vehicle loans, the average consumer credit score dropped to 665 in Q4 2012, down five points from Q4 2011.”

According to Experian:

•    The total subprime market for all new vehicle financing increased by 9.7 percent to 24.77 percent, up from 22.59 percent in Q4 2011
•    The total subprime market for all used vehicle financing increased by 3.4 percent to 55.4 percent, up from 53.58 percent in Q4 2011
•    Buy Here/Pay Here (BHPH) organizations and credit unions showed the strongest market share growth of 4.3 percent and 3.9 percent for overall automotive loans

Tips on buying a car with problem credit

If you’re a buyer that falls into the higher-risk category you should also be aware of the fact that subprime lenders continue to be careful. That being said, you might consider these tips:

•    Know what’s in your credit reports as well as at least one of your credit scores.
•    Choose an affordable small or mid-sized car and with a payment that is no more than 10% to 15% of your gross monthly income (the lower the better).
•    With lenders continuing to look for lower LTV ratios, the higher your down payment, the better the deal will appear. Not including new car rebates or dealer cash, a down payment of 15% or more will increase your chances of an approval.

The Bottom Line

Lenders appear to be increasingly willing to work with people with lower credit scores but they are balancing this by requiring that buyers have actual equity (cash down, trade equity) in these loans.

Another issue that troubles us is the increase in BHPH car loans. The reason we feel this way is that even if you’ve been turned down for a conventional car loan, it doesn’t mean that is the only option.

Here at Auto Credit Express we specialize in helping applicants with damaged credit find those dealers that can give them their best chances at auto loan approvals.

So if you’re ready to reestablish your auto credit, you can begin now by filling out our online auto loans application.

Posted on March 7, 2013 by in Bad Credit
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