Experian, the credit reporting agency, reported on Tuesday that lenders are finally loosening up on getting money to buyers with weak credit scores. So-called subprime buyers (credit score of 680 or lower) of new cars are now getting 13 percent more loans than they did last year at this time.
For subprime used-car buyers, the news is not so good. They are getting 3 percent more loans. So, as is normal in this economy, the happy news is coming to those with more money.
Car buyers with prime credit are getting 63 percent of the loans. That number was 51 percent before the recession, and companies are now financing higher amounts. The average new-car loan was $25,273, up $2,530. Average used-car financing was $16,706, up $977.
So, the situation for used-car buyers still isn’t all that rosy. Your best alternative over Buy-Here-Pay-Here financing is, as always, cash. A friend of mine says, “Pay cash for a good used car and drive it until the wheels fall off.”
If you can’t afford to do that, shop around and be prepared to settle for a lot less car than you may have wanted.
AutoMedia reports that
Used vehicles account for 61 percent of all financing, said John Sigman, national director of business development at Experian, and they have different credit needs. Just over half of used-car shoppers fall into one of the prime credit-score categories; the others are nonprime or lower. The average credit score of used-car buyers is 684, versus 769 for new cars.
The same article reports that car buyers in the Deep Subprime (lowest) category can expect to pay up to 18+ percent APR interest. Ouch! However, there is some movement—among GM and others—to address this market.
Delinquencies were down for all lenders, Experian said, “a very positive sign.” But with used car prices still riding high, if you fall into the subprime category it won’t be easy to acquire wheels without paying an arm and a leg.
Your best alternative is to learn your credit score, shop around for financing, and negotiate the price of the car before you talk any financing options. Our DealFinder can be your most helpful tool in learning a car’s real market value.
Did you have a good financing experience when you bought your last used car?