Auto Loans: Delinquencies Fall, Credit Challenges Continue

[Jun 20, 2009.]

 

NASDAQ reports that auto loan delinquencies were lower during the first quarter of 2009, but that economic woes including tight job markets, credit restrictions, and less discretionary income are expected to negatively impact consumers' buying power into next year.

Fast Loan Not Necessarily Best Auto Loan

Consumers looking for auto loans may be tempted to take convenient financing offered by a dealership, but it pays to shop and compare loan terms. Shopping for an auto loan before looking for a car can help consumers compare rates and terms without the pressure of buying a car first and having to get a fast loan.

Getting Car Loan Credit

Auto dealers are facing cutbacks and sales goals, and want to help you get approved for your next car loan, but shopping online and comparing loan offers can help car buyers locate a car loan with favorable terms and low financing costs. Shopping for a car loan in advance of purchasing is all the more important for buyers with bad credit.

There are several ways to approach getting auto loans with poor credit, but it's likely that poor credit scores will result in higher finance charges. This can impact affordability and the range of available vehicles.

• Buy a used car: Some financial experts recommend buying used cars to avoid taking the full depreciation in value associated with buying a new car. Another good reason for buying a used car is affordability, although interest rates for used auto loans are typically higher than for new cars.


• Rebuild credit before buying a car: Severe credit problems such as foreclosure and bankruptcy don't eliminate the possibility of getting auto loans, but buyers with bad credit can expect to pay higher interest rates for car loans. It's important to watch out for scams preying on consumers with bad credit. Borrowers with very bad credit may find it worthwhile to rebuild credit before taking out a car loan.


• Buy a car and rebuild credit: Taking out a car loan and making payments on time is a great way to restore credit. Verify with potential lenders that payments will be reported to credit bureaus. After establishing a good payment record, it may be possible to refinance a bad credit auto loan to a lower cost loan.

When shopping for car loans consumers should not be pressured into buying a vehicle regardless of financing costs.  There are plenty of opportunities for getting auto loans with reasonable terms; it's better to refuse a fast loan that includes prohibitive finance charges and fees and take time to find the best available  loan terms.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.