A good time to save money is when automakers are running specials. Holidays have long been the best time to do this, and it's especially true right now, with new stock lacking on dealer lots across the country. In lieu of many of the standard automaker deals right now, you may find more dealer-level specials designed to move the stock they have.
THIS is your opportunity, bad credit borrowers.
Study Shows Buyers Are Ready to Pay
A major factor impacting vehicle prices this year is the fact that there are fewer new cars on the market. This is pushing prices through the roof on both new and used vehicles alike. A new study from the Kelley Blue Book industry intelligence team shows that shoppers are expecting fewer choices and higher prices than in previous years.
Here are the highlights:
- Three out of four shoppers are aware of the chip shortage that's impacting the auto industry.
- 73% of survey respondents are expecting to pay more than the sticker price, and many of them are willing to pay around 12% over sticker price.
- Almost 60% of buyers say they're expecting to find lower incentives from manufacturers this year.
- Only 37% of shoppers say current automotive market conditions will delay their purchase, while 60% are not planning on waiting to buy.
Classically, Memorial Day is one of the biggest shopping days of the year to get a new or used car deal. One thing this study shows is that consumers who are looking for a deal now, are ready to move on them as soon as they can.
If you're looking for deals in your area, or are thinking about diving into Memorial Day deals for new or used vehicles, we can help. You can find all the latest automotive deal information here.
Cheaper Cars Aren't so Cheap
Why shop for a deal on a new or newer vehicle when the older model used cars are less expensive? It can actually be more expensive to buy a cheaper vehicle as a bad credit borrower, which means it's even more important to get a good deal.
What do we mean when we say it's more expensive to finance a cheaper car? Let's break it down:
- Finding a used vehicle with a price tag under $10,000 can be a challenge these days, especially if you're looking for something on the newer side of the used car market. If you have a limited budget you're likely to be shopping for cars that are between five and 10 years old, or older.
- Older model vehicles typically qualify for higher interest rates than new cars. Add this to the fact that credit-challenged consumers generally qualify for higher interest rates anyway, so getting an older vehicle can just increase this effect.
- Older cars are likely to have more miles on them and may need more frequent or costly repairs than a newer one.
- Vehicles with over 60,000 miles are typically outside of their manufacturer warranty, leaving you to foot the bill of any minor or major repairs – unless you purchase an extended warranty.
- The older a car gets, the less fuel-efficient it can be, leading to more money spent at the pump or the charging station.
When your credit score isn’t great, it’s usually recommended to finance a used vehicle because of the lower selling price. However, there’s a need to find a balance between affordability and reliability. Used cars come with risk, but you can minimize that risk by ensuring the vehicle’s in good shape. If you do decide on a used car, consider getting a third-party inspection by a certified mechanic, request a vehicle history report, and stray away from cars with branded titles.
Working With Subprime Credit
So many things go into the equation when we're talking about financing a car as a bad credit borrower. Once you've established that your credit score needs help, but you can't wait to get a vehicle, it's more about finding the right type of lender to work with. Not all lenders finance borrowers in challenging credit situations or those that are new to borrowing.
Often, this means working with a subprime lender through a special finance dealership or a buy here pay here (BHPH) dealer. These lenders don't just look at your credit score to determine your auto loan eligibility, but, there are some concessions bad credit borrowers have to make in order for the opportunity to finance.
- Your interest rate may be higher than average.
- You’re required to make a down payment
- You must prove your ability to repay the loan
- You may have a more limited selection of cars to choose from
Though these statements are true of both subprime lenders and BHPH dealers, there are a few differences between the two.
BHPH dealers are the lenders and don't always do a credit check before approving you for financing. However, since they don't need to check your credit, they may not report your payments either. This means that you're not building a positive payment history.
Subprime lenders, on the other hand, typically report your auto loans to one or more of the national credit bureaus – TransUnion, Experian, and Equifax. Building a history of on-time payments over the course of your loan term is an excellent way to boost your credit score!
Shop With Us
If you're ready to get a good deal on financing while building your credit, you're in the right place! Here at CarsDirect, we've been connecting bad credit borrowers with the lending resources they need by matching them to dealerships in their area for over two decades. Let us get you on the path toward your next vehicle – simply fill out our zero obligation auto loan request form to get started now!