Looser Credit Drives Better Automobile Sales


Looser credit drives better automobile sales

Credit Crunch (Photo credit: bitzcelt)

Looser Credit Drives Better Automobile Sales

Because looser credit drives better automobile sales auto dealers this year have enjoyed their most robust sales since the beginning of the recession in 2007.  Looser credit drives better automobile sales as well as driver’s pent up need to replace older vehicles.  Many have made do with what the car they had for lack of available credit and general fears about the economy and their future.

Reuters calculates that the increase is a very healthy 13.5% over the preceding reporting period.  American made vehicles did not fare as well as imports however with both Ford and General Motors losing market share to Toyota and Honda.  The trifecta of lower interest rates, the improving economy led by the housing recovery and new product offerings to tempt buyers on the fence can take most of the credit.  A survey commissioned by FICO predicts higher auto loan default rates in 2014 will be expected as a natural result of the looser credit.

Update:  Latest reports indicate consumer buying surged in May, 2014.  Stronger employment prospects, surging stocks have given consumers a multi Billion dollar boost in confidence.  Consumers took on an additional 19.6 Billion dollars in debt over the previous report of this period.

Pre-Approved Credit Vouchers Require Cash

Credit card companies like to send out notices of “pre-approval” to customers that meet their criteria for auto loans.  These vouchers for a loan of up to a certain amount are taken to the car dealer for you to negotiate your auto loan buy secure in the knowledge that the money is available.  Close scrutiny of your pre-approval letter will reveal that the finance amount will be limited by the value of the vehicle you choose.  This usually means the invoice price for a new vehicle and the book wholesale value for a used vehicle.  These limitations are specified in your package as your “LTV” or loan to value.  This of course means that you must provide your own money for title, registration, insurance and sales tax.  Creative sales people may find ways to roll these additional expenses into your loan.  Don’t be afraid to ask ahead.

Cash is King

Buyers with high credit scores are realizing that the best deals are made through having the cash on hand when you start to shop.  Toyota took the lead in a study by Credit scoring giant Experian of which make had the most buyers with pre-approved bank loans in their quiver.  Experian even went so far as to calculate which makes of cars attracted people with the highest FICO scores.  The results of this study are not surprising.  Leading the list was Volvo followed by Lexus, Acura, Audi and Infiniti.  The buyers with the lowest FICO scores bought Mitsubishis, Suzukis and Dodge.

Lenders are willing to take on more risk today when it comes to vehicle financing than they were willing to do for a long time.  Leasing is more available as well as the strong and recovering vehicle credit finance market moves full steam ahead.

Your best play is to perform a scrutiny of your credit reports by getting your free annual credit reports from annualcreditreport.com  Scrutinize them carefully for mistakes.  Identify your weaknesses, correct any mistakes that may appear and keep paying your bills on time.  Don’t take on needless new credit for other things.  Read my book for more detailed advice.

As always cash is king.  If you have a higher than average down payment it will cover a lot of sins.  Remember you will be paying higher insurance and taxes as well when you are trying to determine if you can afford this new temptation right now.  Sometimes waiting can be wise.  Don’t be hasty when looser credit drives better automobile sales.

Average Credit Scores for Different Makes of Car

The correlation between type of car and average buyer’s credit score is interesting.  The worst selling cars (Mitsubishi and Suzuki) have the buyers with the worst credit score.  More desirable makes of car go to people with higher credit scores.  Here’s the breakdown:

  • Mitsubishi…694
  • Suzuki…….704
  • Dodge……..718
  • Kia………… 721
  • Toyota……..723
  • Jaguar……..810
  • Infiniti………810
  • Audi………..810
  • Porsche……813
  • Acura……….813
  • Lexus……….818
  • Volvo………..818
Auto Buyers Brand Loyalty Leaders

The car with the most loyal customers as defined by returning to buy another is, not surprisingly Mercedes Benz with 57.8% coming back for more.  The next in line for brand loyalty:

  • Toyota………..57.8% return for another Toyota
  • Nissan………..57.4%
  • Chevrolet…….56.4%
  • Subaru……….55.9%
  • Honda………..54%
  • BMW…………53.1%
  • Lexus………..52.6%
  • Hyundai……..51.2%


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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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