Poor Credit Scores Are Costing the First Time Car Buyer

Low Credit Scores and Inexperience are Costing the First Time Car Buyer

The problem many first time car buyers face is a lack of car buying power. In most scenarios, the first time buyer is younger. And because they have not had the opportunity to establish their credit history, they are at the mercy of what the dealer or lender has to offer – which in most cases is long-term loans and astronomically high interest rates. If you are skeptical by this analysis, just take a look at the results of a recent survey commissioned by Capital One Auto Finance. The survey discovered that when the first time car buyer finances their car, they end up spending more than the average consumer. This is due to a number of factors, including:

• Poor Credit Scores
• Higher Interest Rates
• Loan Terms Longer than 60 months
• General Inexperience
• Lack of Knowledge about Loan Options

Of course the results from the survey should come as no surprise: According to FICO, your credit history (or lack thereof) accounts for 15% of your total credit score – meaning that car buyers who have no credit history will have their overall score negatively affected. Then, when it comes time to obtain a loan, your chance at a low interest rate disappears, driving the overall price of the loan up. The correlation between an interest rate and how much you pay:

• Credit Rating of 680 or Better: For instance a person with a good credit rating (680 or better) can often get an interest rate of 7 percent or less. On a four-year, $20,000 dollar loan this translates into paying $2988 in interest.
• Credit Rating Below 680: Unfortunately, a credit rating of less than 680 can translate into an interest rate of 20 percent, or more. So, on that same $20,000 dollar loan, the interest rate will wind up costing you $9,213.

With the above examples showing a difference of more than $6,000, it’s easy to see how a first time car buyer with no credit history and a poor credit rating can wind up paying more than the average consumer.

A poor credit score does not mean you have to sacrifice ownership or quality

The good news is that lack of credit history or a poor credit rating does not have to affect your ability to buy a quality car. While a high interest rate on a new car can cost you thousands of dollars, used cars can be just as reliable and offer any number of financial advantages. In fact, UsedCars.com offers access to a wide assortment of used cars priced under $5,000. And because the interest rate on these smaller loans is far less than that on a new car, you will save thousands of dollars in the process. Better yet, because of engineering advancements over the last decade, most used cars on today’s market are in great condition. Of course you will want to have the car thoroughly inspected before you make any final decisions. However, with access to thousands of used cars from dealers across the United States, UsedCars.com is here to help you find the one that will meet your needs.

Are Luxury Cars Worth the Price?

Luxury brands, such as Mercedes-Benz, BMW and Lexus, not only offer the allure of refinement and comfort, but their names have become synonymous with class and performance. Firmly cemented as leaders in the luxury car marketplace, these cars offer prestige to everyone who drives one – resulting in elevated social status levels and looks of envy on the faces of the other motorists on the roadways.

The question then becomes whether these cars are demanding their premium price tags based on their high-end features and premium performance engines? Or, whether car buyers are simply willing to pay more because of the status the brand names carry?

Luxury Cars Really Do Offer More

When compared to the average car on the market, luxury vehicles generally offer more in terms of power, driving experience, high-tech features and advanced trim options. Even while affordably priced economy cars, like the Ford Focus, are offering high-tech features such as park assist and touchscreen console controls, luxury cars are taking this sophistication to the next level – seemingly blending interior comfort features with performance to create a driving experience that stands head and shoulders above all the rest. 

But You Pay More (And not Just on the Sticker Price)

The initial sticker price tag is not the only place where these vehicles cost more. When it comes time to shop for insurance, luxury car buyers often have to pay more. This is especially true for high-end performance cars, where a higher liability risk corresponds to higher insurance premiums.

Maintenance costs are also another major consideration when buying a luxury car. Not only can repair parts be expensive and hard to find, but it can also be hard to locate a mechanic capable of repairing one of their sophisticated engines. The end-result being that you end up paying a premium on repair bills.

Luxury Cars Hold Their Value

While value will depend on the specific vehicle and the current state of the used car market, luxury cars often hold their value better than other vehicles. This is especially true when buying used. After its first three years, a luxury car will have already incurred its greatest losses in terms of value. So if you really want a premium car, but at an affordable price, a later model used luxury car is an ideal choice.

The bottom line is that a luxury car is worth its price – especially when you buy it used. When purchasing a luxury car that is two to three years old, you are still receiving a high-end driving experience, just for thousands of dollars less than you would if you had bought it new.

Transforming a Chrysler Sebring into a Bentley Continental?

For most of us, owning a Bentley Continental is out of our price range. In fact, a quick search using the tools provided to me by prominent used car search engine, UsedCars.com, reveals that the average two to three year old Bentley is selling for well over $100,000.

Unfortunately, for most us this would mean choosing between a house payment or car payment – and I am going to guess that 99% of the time the house payment is going to win out over the Bentley.

But don’t despair – For the dreamer in all of us, there is a much more affordable option: It’s called a replica body kit.

Just look at what this Bentley Continental GTC Super Sports Body kit did for a Chrysler Sebring Convertible.

By the way, you read that right. The car pictured here used to be a Chrysler Sebring. Well, to be honest, it still is a Chrysler Sebring. You just would never know it from the outside.

Designed to look eerily similar to the real thing, this once practically designed, nothing-special-about-it 2003 Sebring has been transformed into an eye-popping, head turning 2012 Bentley Continental – at least from the outside. But let’s be honest, most of the people you are probably trying to impress will never set foot inside your car.

What’s more impressive is that this transformation is pretty complete. With working headlights, taillights and exhaust tips, you can go racing down the road in your very own-elite supercar, with no else being the wiser.  

Sandy Brings Storm of Rising Used Car Prices: How Should You Prepare?

In the wake of late October's devastating hurricane, industry experts are now telling us to  prepare for another storm, albeit one of a different variety. While as predicted, hurricane Sandy brought with it rain, wind, floods and power outages, it also brought with it something that was a little more unexpected – Rising used car prices.

The reasons for this seems simple enough: As hurricane victims begin their search for replacement cars, they will do so by turning to the local dealerships in the Northeast, an area which accounts for almost twenty percent of all new and used car sales in the United States. Unfortunately, those local dealerships were hit just as hard, and their inventories are already at record lows.  

So what is going to happen when consumers come knocking and those dealers have only limited options? Yep, you guessed it: prices are going to rise. In fact, in an interview with Auto Remarketing, Edmunds.com director of analysis Ray Zhou predicted that "Used vehicle prices will increase $700 to $1,000 in the impacted area"

Unfortunately, while the immediate impact will be on the Northeast, car buyers across the country should begin to prepare for a rising price storm. Because those local dealerships are going to cast a wide net to meet demand, pulling in cars from all over the country, used car prices everywhere will be affected throughout the upcoming months.

Prepare yourself for the rising price storm.

The question then becomes:  If you are one of the thousands of consumers in need of a car during the next several months, how do you avoid paying those higher prices?

Well I sought out the advice of the used car buying experts over at UsedCars.com. As the prominent online used car search engine, they were able to shed a little light on a few money saving tips:

·         Buy now:  While this may seem like a contradiction in terms, you should not wait for prices to go down – especially if you anticipate needing a car within the next several months. Right now, the hurricane has interrupted car sales in October and early November, and we have yet to see the prices jump.  This means that if you have the opportunity to buy a car within the next week or two, it’s almost imperative that you strike while the iron is hot.

·         Think Compact: The compact car industry was best prepared for the increased demand. New and used inventories for compact cars were in surplus before the storm, which means that there may be enough supply to meet this demand.

·         Avoid Luxury: According to Edmunds.com, New York, Philadelphia and D.C. account for 25% of all luxury cars sold in the United States. This means that now may not be the best time to think about buying a luxury car.

·         Shop Online: The dealerships in the Northeast are turning to the internet to replace their inventories, and truthfully, there is no reason you cannot do the same.  Car buying search engines have made it easy for car buyers to shop for deals all over the county. You simply enter in the make or model you are interested in, and the search site returns a list of dozens of cars that meet your criteria.

One final piece of advice shared, is the potential for flood damaged cars infiltrating the market. Car buyers over the next several months need to be on the lookout for cars that were damaged during the massive flooding that accompanied the storm.