Busts 5 Top Myths for Below-Prime Auto Loan Consumers

IRVINE, Calif., July 30, 2013 /PRNewswire/ -- With roughly 45.2% (1) of auto loans going to Americans rated with below prime credit, today debunked five persistent myths about the below prime auto loan process and provides advice for consumers considering a vehicle loan.

"Car sales are rising and there is still pent-up demand from consumers who have recovered from the recession and are ready to buy a car, but who may still carry residual credit challenges in applying for loans," said CEO Jim Landy. "Although the overall car buying/loan environment has changed significantly over the last several years - with lower interest rates and consumers holding onto their vehicles for much longer - myths about the below prime auto loan process persist. These myths deserve to be busted for the population of below prime consumers who want, and need to buy a car, but don't know that they can."

Recent data shows that delinquency rates continue to be well below pre-recession levels and industry experts agree that today's consumers are doing a better job of managing their auto loans and payments.( 2) This, noted Landy, is further proof that the old stereotype of the below prime consumer mismanaging their auto loan credit is itself a myth that should be 'busted."

Top Five Below Prime Auto Loan Myths

Myth #1: If I'm a below prime buyer, I have to make a down payment - and a big one...

Reality: You do not need a large down payment -- and, in some cases, no down payment is required for auto financing, but it usually makes financial sense to put at least some money down.

Proof: For example, atlenders such as, consumers can put down as little as $1,000 or sometimes nothing.

Tip: Even though a down payment is not necessarily a requirement for many lenders, consumers should note that putting money down will offset monthly payments and interest paid and often results in a lower interest rate.

Myth #2: If I'm below prime, and want to get approved for an auto loan, I will have to have been in the same job for years...

Reality: Being in the same job for at least 6 months is the pivotal factor.

Proof: reports that to qualify for a loan, 6 months of continuous work is the key timeframe to be on the current job, with an employment history of two years. That being said, at CarFinance the average time on the job for consumers who are applying for auto loans is much more stable at nearly five years, another indication that today's below prime car buyer is defying the stereotype.

Tip: Consumers who have put off applying for a loan because they have only been steadily employed at the same job for six months should submit an online application to see if they qualify. However, secure and steady employment is key in demonstrating the stability and ability to repay the loan.

Myth #3: I can probably get approved, but only for an older used car...

Reality: With so many economical and high-value options available, below prime consumers should know that it is possible to get approved for a late model used - or even a new - vehicle, provided the monthly loan payment fits within the consumer's budget . For example, the top ten most purchased new vehicles by below prime consumers differs greatly from the national list of top selling vehicles, and is dominated by practical sedans that offer good fuel economy and value, such as the Kia Forte and Optima, Nissan Sentra and Versa and Ford Focus.

Proof: Over one quarter of below prime auto loans nationally were for new cars in Q1 2013.( 1) Interestingly, while just over 20% of vehicles financed at CarFinance were brand new, the used vehicles that were financed were less than three years old at an average of 2.7 years. So, even consumer who are opting for used, are focusing on 'newer' used cars with lots of up-to-date features at a lower price point.

Tip: Below prime consumers are not necessarily restricted to used vehicles. However, while new cars are a great option, late model used cars make great alternatives, often offering a much better dollar value- especially given that a new car loses 11% of its value when it drives off the lot. Click here to download info on the actual cost of ownership of the top selling vehicles for below prime car buyers.

Myth # 4: Auto loan terms over 48-60 months are always a bad idea

Reality: With better interest rates available and the fact that consumers are holding onto their cars for much longer (the average age of cars on US roads is 11 years(3)), loans over 60 months are becoming more common(4) However, consumers considering longer-term loans should be aware that it could mean they will pay more for the vehicle (in interest) in the long run.

Proof: According to Experian, today the average term of a new car loan is about 65 months, with used car loans slightly lower at 60 months.(4) The fact is that longer-term loans are not always a bad idea: for example, if the consumer needs a lower monthly payment and plans to hold on to the vehicle for the long term, it could make sense. And, longer terms mean that consumers can purchase a higher priced car while keeping monthly payments the same. Plus, consistently making a monthly payment for the long term (as with any loan term) is a good way for consumers to improve their credit.

Tips: The decision on loan terms is very much dependent on the specific factors impacting each consumer and caution is recommended - consumers with longer-term loans should be committed to that vehicle for the long term.

Myth #5: I have to try to get financed at a dealer or bank. As a below prime customer, I can't get pre-approved, and be able to walk in cash-in-hand...

Reality: Today, new online channels enable consumers to apply and get approved instantly online so that they know exactly what they can afford and what their vehicle options are. This means that when they are in the dealership, they have cash in hand and they can focus on the car itself, not the financing.

Proof: According to a survey, 83% of consumers find something unpleasant about the loan process, with the time-consuming nature and general stress of the process, and lack of privacy, ranking highest for dislikes. Applying online eliminates those issues, and more and more consumers are using that option.

Tips: Applying online for a loan at sites like is easy, fast and can be done from the privacy of home. Depending on the lender, the entire process can be completed virtually online, including all paperwork and signing of loan documents.


(2) "...looking at subprime loans today versus prerecession it appears consumers are doing a better job today of managing auto loans and continuing their payments," Zabritski said. (Melinda Zabritski, Experian's senior director of automotive credit.)

(3) AAA


About's ( is dedicated to helping the nation's large population of car buyers with less-than-perfect credit purchase a quality, late-model used or new vehicle. empowers car shoppers to apply for a new or used car loan, or potentially lower their existing car loan payments through refinancing, from the comfort of home. The entire process is completed virtually online directly with the lender, and personal information is kept private, safe and secure. enables car shoppers to walk into the dealership with their financing in place and confident they can secure a better deal by negotiating price as if they were "cash buyers." Headquartered in Irvine, California, is led by the team that built Triad Financial, one of the largest non-prime U.S. auto finance companies.


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