The Bankruptcy Law Network blog reports that banks and financing companies are focusing more and more on auto buying consumers with low credit scores. Just as sub-prime mortgage lenders generated tens of millions of dollars in fees and service charges selling sub-prime loans to credit-challenged home buyers, the same approach is now being directed at car buyers.
The sub-prime auto buying market represents good business, according to a spokeswoman from credit reporting agency Experian. The market for used vehicle is good, repossession in case of delinquency is easy and inexpensive and multiple outlets (auctions, small and large dealerships) exist to resell repossessed vehicles.
Even 20 to 30 points improvement in your credit score can mean the difference between a 15% sub-prime loan with a lender who will quickly send out the repossession truck and a much more palatable 3% to 5% market rate loan with a first tier auto lender.