Bad credit car loans are easier to get than ever before, thanks to the growing subprime loan market. Almost half of all car loans today are bad credit loans, in that they are made to borrowers with FICO scores below 620.
Bad Credit Buyers Beware
Bad credit car loans come with slightly higher interest rates, which mean higher profits for car dealers and unwary buyers may wind up spending more than they have to. NADA Chairman Charley Smith admits, “We recognize that many consumers may not know that the interest rate may be negotiable or that the dealer may be compensated for obtaining financing.”
This is one reason many experts recommend that car buyers use “direct financing.” This means getting a car loan directly from the lender instead of through the dealer. Not only can they find more competitive rates on bad credit car loans, they can avoid the hassle of going through a dealer’s high-pressure finance office.
The difference between the interest rate on new or used car loans does not vary that much because used vehicles don’t depreciate as quickly as newer models. This makes them better short-term collateral for lenders. The average used car costs less than half of what the average new car does. That’s why they outsell new cars three-to-one. However, choosing a new car gives the buyer more control over optional features, plus a warranty that lasts for years.
Hispanic Car Buyers
Some of the shoppers looking for bad credit car loans are Hispanic. The term loosely refers to all Spanish-speakers. Most Hispanics in the U.S. are descended from immigrants from Mexico and Central America. Our Hispanic population now stands at 41.3 million and is growing three times faster than the general population. Hispanics will number 47.7 million by 2010, and 60.4 million by 2020.
Hispanic buying power is growing at an annual compound rate of 8.2%, nearly twice the rate for non-Hispanics. It is projected to reach $1 trillion annually by 2010. A recent survey by The Media Audit reveals the following interesting facts when it comes to car buying: