Automotive finance a bit cloudy going into 2017
Posted on Tuesday, November 29, 2016 at 12:41:22 PM
There is no denying that the automotive sector in the United States has bounced back impressively from the grasps of the recession, especially in 2016. Lenders are more confident in disbursing loans, while consumers are exhibiting plenty of willingness to ride the wave and make more purchases. However, concerns regarding lending practices among certain categories of financiers, as well as other negative trends that are intensifying, make for a very cloudy picture when looking toward 2017.
Consumers must remain intelligent in their purchasing decisions, and only sign on to lease or loan contracts that will benefit them in the long term. With all of the options available today, it can be difficult to sift through and identify the right one. Knowledge of the market can help to better inform decisions in this regard.
More consumers underwater
USA Today recently reported that about 32 percent of cars that have been traded in this year were less valuable than the remaining balance on their loans, which is a record. According to the news provider, 2006 marked the last time a record was set, at 29.2 percent, and analysts are attributing this new high to the lending practices of many financial entities across the marketplace.
Notably, while high percentages of underwater cars are never an entirely positive economic indicator, they do tend to sprout up when credit is more accessible. The news source pointed out that the lowest recorded rate of these vehicles was at the height of the recession, with only 13.9 percent of automobiles falling into this category in 2009. USA Today also pointed out that the record highs of new car prices, which are now at an average of $34,000, as well as longer loan terms with high rates, are certainly playing a role in this.
Consumers should be aware that having an underwater vehicle is dangerous and simply not enviable. They can avoid the prospect of experiencing this particular calamity by being very diligent when planning out finances and deciding upon both a car and the loan used to purchase it.
Benefits of used cars
Auto Credit Express recently explained some of the differences between leasing a new car and purchasing a used vehicle, as well as which is more beneficial for certain types of consumers. The website stated that when bad credit is a concern, purchasing a used car can often be a better option than leasing a new one. According to Auto Credit Express, used cars will tend to be less financially burdensome, and will also position the consumer to improve their credit so long as they keep up with their loans. What's more, the source pointed out that getting a loan for a used car tends to be far easier than on a new one.
At the end of the day, you might want to discuss these matters with an agent from your local bank. These professionals can give you a more personalized perspective of which automotive financing options will be best for your particular situation.