According to the State of the Automotive Finance Market Report by Experian for Q4 of 2015, when divided among the risk segments of Super Prime, Prime, Nonprime, Subprime and Deep Subprime, the percentage of used car loans among subprime buyers was 26.61%, while new car loans among the same segment, only made up 10.70%. These findings seem to indicate that when car buyers are dealing with bad credit, they are choosing more affordable options.
While the option of a new car for bad credit buyers is certainly not out of the question, the gap between the average amount financed for new and used car loans indicates that income makes a big difference when it comes to what a subprime buyer can finance.
Average finance amount subprime buyers are being approved for, per segment:
- Used Car: $16,071
- New Car: $28,231
Keep in mind that when buying a car with a subprime auto loan that the interest rates will be higher. This means that, for a given interest rate, the higher the purchase price of the vehicle, the more you will pay in interest charges.
It Pays to Buy Used, but It Also Pays to Buy Smart
We know that when looking for affordable transportation, it can be tempting to find the lowest priced vehicle possible. However, keep in mind that the amount you need to finance as well as the age and mileage of the car will play a factor in whether or not a subprime lender will approve you.
- Minimum financing amounts
The typical minimum amount a subprime lender will finance for you is $5,000.The reason for this is the fact that any vehicle selling for less than this is probably not going to be dependable. These lenders also charge higher interest rates because loans to buyers with lower credit scores present a higher risk of default.
- Age & mileage of the car
Subprime lenders require your selected vehicle to be 10 years old or newer and/or have less than 100,000 miles on it. The reason for this is that these vehicles are more reliable. After all, you don't want to find yourself making payments on a car that isn't running.
These guidelines are in place to ensure that, as a borrower, you will have the best opportunity to successfully complete your loan. Finally, always remember to get any used vehicle you are considering inspected.
With quality and price in mind, we give you the top five top selling used vehicles at or under 16k in the subprime segment (Prices may very depending on region and demand):
2014 Ford Focus: $15,009
2012 Ford Fusion: $14,794
2013 Chevrolet Impala: $14,647
2013 Hyundai Elantra: $14,538
2012 Chevrolet Cruze: $13,372
Financing the Right Car
Whether you are looking for a new or used car, Drivers Lane can connect you to a subprime dealer that can help you get approved. We have a nationwide network of dealerships, so we are confident that we can find the right dealer nearest you fast. Complete our simple and fast online application today to see what we can do for you.