A report released yesterday by Experian Automotive dealing with auto loan terms and payments also contained some good news for consumers with questionable credit
At Auto Credit Express we’ve noticed that some reports from Experian Automotive, even those that don’t directly address the issues of bad credit buyers, often contain nuggets of information dealing with subprime car loans.
As such we feel it’s important to pass this information on to buyers that have experienced problem credit that are currently searching for online auto loans.
Experian Automotive report
The June 4, 2013 report primarily focused on vehicle leasing and average loan terms for new vehicles as well as average monthly payments on new and used vehicle loans during the first quarter of 2013.
It also goes on to compare loan terms and interest rates to those in the first quarter of 2012. But in most cases this information has little to do with the issues most credit-challenged car buyers face including shorter loan terms and higher-than-average interest rates. So why mention this report in the first place?
That’s because one of the questions we get asked most frequently is “Can I buy a car with poor credit?”
You can buy a car with poor credit
The fact is that according to this latest Experian Automotive report it is getting easier to buy a car with less than perfect credit.
Reading through the press release here is what we found:
In a section titled “Subprime loans on the rise” it states that “The report also showed that consumers within all credit tiers were able to obtain financing in Q1. Most notably, loans going to consumers with credit outside of prime (nonprime, subprime and deep subprime) jumped to 45.2 percent of the overall loan market in Q1 2013, up from 44.4 percent in Q1 2012.”
Additionally, “For new vehicles, the share of these loans jumped to 25.1 percent in Q1 2013 from 23.2 percent in Q1 2012. For used vehicles, nonprime, subprime and deep-subprime loans accounted for 57.7 percent market share in Q1 2013, up from 56.8 percent in Q1 2012.”
The fact that more loans are being made to applicants with problem credit is important and should be considered good news to consumers that currently find themselves with poor credit scores.
According to Experian:
• The average credit score for a new vehicle loan dropped to 755 in Q1 2013, down from 760 in Q1 2012
• The average credit score for a used vehicle loan dropped to 657 in Q1 2013, down from 659 in Q1 2012
• Finance companies had 15.5 percent market share, up 5.1 percent from Q1 2012
• Buy Here/Pay Here financing had 10.7 percent market share, down 6.4 percent from Q1 2012
The good news here is that finance companies (who report to the credit bureaus), many of which loan to people with credit problems, have increased their lending. This is in contrast to the drop in BHPH financing (lenders that usually don’t report to the credit bureaus), where consumers with bad credit usually end up if they can’t get a loan through a finance company.
How to buy a car with risky credit
Car buyers that fall into the higher-risk category should also consider these tips:
• Know what’s in your credit reports and at least one of your credit scores.
• Once approved, 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).
• These lenders like lower LTV ratios. The higher the down payment, the better the deal will look. Not including new car rebates or dealer cash, a down payment of 15% or more will increase the chances of an approval.
As we see it
Lenders are more willing to approve applicants with lower credit scores but are balancing this by requiring that buyers have equity (cash down, trade equity) in these loans.
Another issue for credit-challenged buyers: even with a rejection for a conventional car loan, it doesn’t mean the only option is a BHPH car dealer. In fact, Auto Credit Express specializes in helping applicants with car credit issues locate those dealers that can give them their best chances for approved auto loans.
So if you’re ready to reestablish your auto credit, you can begin now by filling out our online auto loan application.
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