The changing trends in the auto industry prove to be beneficial to a handful while dangerous for the rest. Bad credit is an inevitable mark on your credit report that requires work to turn it around. The subprime auto crisis is a recent scenario that brought about a wave of sad information for bad credit car buyers. Prior to plunging into the know-how of how the subprime auto crisis will hit bad credit buyers, it becomes imperative to understand the event, scrupulously.
What exactly is the Subprime Auto Crisis?
TransUnion is an esteemed credit bureau agency that publishes the ‘Industry Insights Report’ every quarter. The report talks about the shifting trends with regards to the auto industry. The Q1 Industry Insights Report indicated certain points of concern. The biggest takeaway from the report was that the volume of subprime and deep subprime auto loans has decreased since 2016. A subprime credit score is considered below average, ranging from 500 to 600. In comparison to 2016, there has been a 5 percent rapid decline of subprime auto loans in the first quarter of 2017. Higher number of auto loans is given out to creditworthy customers with a good credit score and favorable credit history. Therefore, the bad credit auto buyers have taken a hit and will require taking appropriate steps in order to buy their dream car.
Are Bad Credit Car Buyers affected? What can they do about it?
1) Competing with Better Credit Scores
The bad credit car buyers will have to compete with the good credit and average credit car buyers. The average credit score for a new car rose from 712 to 717, while the used car average credit score rose to 652 from 645. The incremental credit score will require increased efforts to fill in the gap and rise above the subprime score. A bad credit car buyer can start by paying off all the past loans and clearing his/her debt. Additionally, applying for a bad credit auto loan will help in finishing the car buying process quickly.
2) Set Realistic Goals
A used car is a realistic goal than attaining a brand new car. The subprime crisis means fewer auto loans are getting approved and credit score is the biggest deciding factor. Meeting the mark of a used car is practical as it has a lower average credit score requirement than a new car. A used car will attract lower interest rates and serve your purpose of owning a car. Ensure that you give a hefty down payment to your dealer as it will reduce your loan amount and assist you in enjoying low interest rates. Do not forget to take complete advantage of the increasing supply of the old model used cars and negotiate a price that suits your wallet.
The Bottom Line: Dealing with Subprime Auto Crisis requires Patience
An effective method to deal with any crisis is to take a small step to figure out a solution. Eventually, a few small steps turn out to be a trail of well-crafted answers that pull one out of the crisis. In the past, subprime auto crisis has taken a severe hit on the bad credit car buyers. However, with correct tactics, hard work and enough patience, a bad credit car buyer can purchase his/her car without worrying about the credit score. |
