According to TransUnion reports, auto loans top budget priority payment lists. Even the crash of the housing market, homes loans still fall second to car payments. The mortgage delinquency rates push beyond 30 days yet this expense still takes priority over credit card debt. It makes sense. Why fall short on secured loans when there is personal property at stake? Credit bureaus are not the only eyes watching this trend. Car dealers have taken notice and they are taking advantage of consumer’s eagerness to pay.
Dealers will push a brand new car. Who can resist the smell and sleek interior? It’s a nice thought to be able to get all the latest bells and whistles. It’s okay if your credit score is less than perfect. Dealers have the proof they need that customers are willing to make their loan payment. The salesman will make it is easy to afford the installment loan payment even for those with sub-prime credit. By extending the term of the loan to 5 – 7 years, the finance department will manipulate the payment plan to fit your budget. You probably will never even notice what interest rate you are paying. The excitement of a loan approval will often fog those details. Long loan terms equate to lots of interest charges. It’s a small detail the finance department will probably choose to omit from their convincing speech. Don’t want to pay the extended interest payment? The dealer will understand and lead you to the used lot. installment loans
There is a sale’s pitch waiting for the buyer in a used lot as well. Many car lots only focus on used vehicles. Dealers know that many consumers don’t want to drive off the lot and immediately lose a chunk of the car’s value. A used car is not only more affordable than a brand new one, but you can get a reliable vehicle for a lot less money. Consumers ditch the brand new car smell for more affordable payments. As with new cars, finance plans can create very low monthly payments using extended terms. A smaller payment will help the budget. Car shopping, whether used or new, is an exciting time.
Customers are willing to make their car payments. Dealers take advantage of this situation by inviting sub-prime customers to their lots with pre-approved loan notices. Similar to credit card companies, pre-approved notices are mailed to attract new customers. Higher than average interest charges are welcomed for many who thought they would never be able to buy a decent vehicle. The dealer understands. Not only are the offers high interest, but the loan itself is secure with the vehicle as collateral. Dealers are in a win-win situation when offering a hand to those with credit challenges. It doesn’t matter to the salesman that the customer may not be able to afford other living expenses. They have their own paycheck to worry about.
What consumers should consider before purchasing a car –
– Loans with terms longer than 60 months. The final ending price inflates from interest costs. Pay extra whenever possible to decrease loan term.