According to a report from Experian, 2014 saw an increase in 30 and 60 day auto loan delinquencies. While at first this may seem like a bad sign for lending, the spike is something that lenders have been expecting for a while now.
“While we have observed a rise in delinquencies over the past few quarters, it was to be expected due to the growth in subprime loans,” said Melinda Zabritski, Experian’s Senior Director of Automotive Credit. She also added, “Understanding the shifts in payment behavior and the industry’s risk tolerance are important for the market because these insights can trigger actions that affect vehicle prices, loan terms or interest rates.”
Making the Best Choice on Your Auto Loan
So, what can car buyers do in 2015 to ensure that they don’t become part of that statistic?
- Try to avoid long loan terms if possible.
Aside from paying more in interest charges, longer loan periods increase your chance of finding yourself in a situation where you may not be able to make your car payments due to a major emergency, such as an injury or losing your job. A term that is 48 months or less is recommended.
- Buy within your means.
Look for something that meets your needs, but also remember to look at the overall price of the vehicle; not just the monthly amount. This may mean looking at cars that aren’t brand new. Keep pre-owned vehicles in mind and you may find what you’re looking for in a more affordable price range.
- Have a strong down payment.
It’s tax season, which means that you could be looking at a good-sized tax refund. By investing that refund as a down payment on your next car, you are reducing the amount of money you need to borrow, as well as putting some positive equity in the car.
Basically, the best thing you can do for yourself is be informed about your purchase and keep up with your payments. With an affordable car and an appropriate loan term, you lessen your chances of defaulting on your loan. The team at Suburban Auto Finance can help you find the deal on that car, truck or SUV that you’re looking for. Fill out our quick auto loan application to get started today.