By on April 24, 2013

Sub-prime finance has attracted a bit of interest (no pun intended) over at TTAC lately, and the segment itself has experienced phenomenal growth in the post-bailout era.

Auto lending site www.carfinance.com released a list of the top 10 most popular new and used vehicles as purchased by sub-prime buyers over the last six months. While it’s not the most complete list by any means, it does give us a glimpse into the choices of sub-prime buyers. As far as we know, no such list has ever been compiled prior to this.

Top 10 New Cars for sub-prime buyers according to carfinance.com (from October to March 2013)

1. Dodge Avenger

2. Kia Forte

3. Kia Optima

4. Chrysler 200

5. Dodge Journey

6. Ford Focus

7. Ram 1500

8. Nissan Sentra

9. Nissan Versa

10. Kia Sorento

A few things jump out here. First off, this list has almost no crossover with the usual top 10 selling new vehicles in America. Only the Ram 1500 appears on both lists. Second, Chrysler products make four appearances on this list, with the Dodge Avenger and Chrysler 200 well know among the B&B for being very aggressively priced, to the point where it makes buying a Dodge Dart seem nonsensical. Chrysler has also been ramping up their own sub-prime lending program, through Santander and was the leader in sub-prime lending last year.

Also interesting are the relative dominance of Nissan and Kia. The latest Sentra and Versa have also been priced with a view to undercutting the competition, and the Versa has had success in the sub-compact market with its extremely cheap offerings (nonwithstanding the loss leader $9,995 Versa S, which is meant to get people in the showrooms and little else). Kia comes as a bit of a surprise, as very little is ever heard about them in connection with sub-prime purchasing. Any commenters with information or data that can help provide a better picture, please feel free to contribute.

 

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214 Comments on “A Snapshot Of What Sub-Prime Buyers Are Driving...”


  • avatar
    Commando

    Isn’t this what Mitsu resorted to years ago and it turned out to be their financial collapse and Mitsu’s been in a downward spiral ever since>

    • 0 avatar
      Car Guy

      My thoughts exactly. I remember Mitsu’s 0-0-0 program. It was really a mess for them and drove a high default rate.

    • 0 avatar
      sunridge place

      Mitsu’s problem wasn’t subprime…it was the 0-0-0. I think they were actually $0 down, 0% interest, 0 payments for a year at one point. People would just drive the car for a year then default.

      When done correctly, subprime is very profitable and not a risk overall.

      • 0 avatar
        Commando

        “Mitsu’s problem wasn’t subprime…it was the 0-0-0…”
        You’re getting the same bad actors in both scenarios.
        Call this bubble-waiting-to-burst what you want.

        • 0 avatar
          corntrollio

          No, you’re not. Poorly underwritten loans are the problem, not subprime. Once again:

          Prime:
          1) good capacity to pay
          2) good collateral (new car should be fine, and if the bank is concerned, they can request a down payment)
          3) good credit score (A paper)

          Subprime:
          1) good capacity to pay (same standard)
          2) good collateral (same standard)
          3) slightly lower credit score (B and C paper, maybe even D paper)

          Non-prime/non-subprime loans, such as many of the Option ARM, negative amortization, Alt-A, and other mortgages that were given out during the recent housing boom:
          *does not evaluate #1 or #2 properly
          *considers #3 to be most important

          As long as the loan is properly underwritten as a true subprime loan (as the term is used by finance people, not CNN), then it should be fine. A properly underwritten loan should have predictable default rates, which is properly compensated with higher interest rates. Properly underwritten subprime mortgages never defaulted at the same rates as the non-prime/non-subprime mortgages.

          The media calls everything “subprime,” but many of the funny money loans that were made during the recent housing boom do not meet the standards of true-subprime because they didn’t meet factors #1 and #2, as the term is known in the industry.

    • 0 avatar
      Secret Hi5

      It seemed that Mitsubishi ONLY catered to subprime, whereas the automakers in Mr Kreindler’s article sell to a wide spectrum of markets.

    • 0 avatar
      blowfish

      should a manu/ business is too dependent on sub-prime consumers soon as the market got shaken up a bit u be in it for a pretty wild ride.
      One has to try avoiding quick death and try to buy a bit more time, pray the market can turn around in 6 mths.
      Atleast Uncle Sam has its own magic oil & lots of gas, when oel price stays low we have employment.

    • 0 avatar
      icemilkcoffee

      In fact I’m rather surprised that no Mitsu made the list. I don’t know if that’s good news, or bad news because even subprime buyers are avoiding them!

    • 0 avatar
      corntrollio

      There’s nothing inherently wrong with subprime if you are using the technical definition of subprime (high capacity to pay, good collateral, lower credit rating than prime). If you are using the media-definition of subprime, it means creative loan products, such as those 0-0-0 car loans created by Mitsubishi and those Option-ARM, Alt-A, and other products created by the mortgage industry.

      The issue is poor underwriting, not subprime in and of itself.

  • avatar

    I work in mortgages.

    #1 The banks are giving loans for NEW CARS before USED CARS because their logic is: if you default on the loan, they can take back the vehicle and auction it before too much depreciation sets in.

    For too long they’ve overcharged and hiked up interest rates on people with subprime credit buying used cars. Now the used car market is a mess – it looks like the new car market – because so many cars on it are just 2 – 4 years old and have less than 20,000 miles on them.

    #2 DO NOT LEASE A CAR AT AN INTEREST RATE HIGHER THAN 10%.

    #3 DO NOT LEASE A CAR UNDER $40,000

    One of my clients had a 520 and he ended up leasing a gotdamn Ford 500 for $680 a month with a 21.2% interest rate because he had no choice at all.

    I recently took a friend shopping and because she’d never maintained a line of credit she had a “0″ score “no credit established” and was basically treated as if she had bad credit.

    I also had a female friend buying a car who had a 700 score but hadn’t kept lines of credit long enough to be able to qualify for a low interest rate.

    I guess because the banks can’t be sure Americans will have a job for 30 years to pay a mortgage, they’d rather just sell us a car loan. Fortunately the Chinese car market is doing great! What – with them having OUR INDUSTRIAL JOBS and everything.

    • 0 avatar
      Easton

      I love this post. Really smart and hit the nail on the head. The rough economy and the hypocritical financial system have made it virtually impossible for people to obtain and maintain good credit. We’re all vulnerable to the banks and credit companies that it is so easy to get screwed and so hard for average people to afford decent cars.

      • 0 avatar
        28-Cars-Later

        I would say very difficult but not virtually impossible. I also agree its difficult for average people to afford decent cars but excluding proven truck designs and save a few models, I have shaky confidence on most of what’s being sold today at any price point.

        • 0 avatar
          thelaine

          I have shaky confidence on most of what’s being sold today at any price point.

          Agree here 28. Is there any reason to think you are more likely to get a reliable car that will go 150k+ relatively trouble-free miles if you spend 60k rather than 20 or even less? Cars overall have gotten a hell of a lot better over the years, but you still never know, regardless of price.

      • 0 avatar
        dwford

        Its really not that hard to keep a good credit score. Only buy what you can afford, and pay your bills first every week instead of burning your money on eating out or movies, booze, clothes etc.

        • 0 avatar
          bunkie

          Yes, it’s all so simple. But you forgot a few things:

          Don’t get sick
          Don’t lose your job
          Don’t have family members who get sick
          Don’t have family members who lose a job
          Don’t get divorced
          Don’t live in a town where the plant is being closed because the next state over offered to bribe the company to relocate
          etc…

          I sincerely hope that none of these things ever happen to you. Unfortunately, the odds are that some of them will.

          • 0 avatar
            geeber

            Based on what I’ve sen, poor credit scores generally aren’t the result of those unfortunate occurrences.

          • 0 avatar
            bunkie

            See Ubermensch’s response.

            You may not have seen these things happen, but I’ve lived a couple of them. My good credit score vanished in a matter of months and took years to restore. Everyone got paid off and I dug my way out the hard way. So I tend to get a little testy with people who think that credit issues are solely a function of a lack of moral fibre or discipline.

        • 0 avatar
          08Suzuki

          I see someone’s been dipping into Suze Orman’s Kool-Aid frequently.

          Credit Scores are not just a function of paying off debts – it’s as much (or more) a function of buying on Credit, period. Following your advice could lead to as bad a credit score as being buried in debt – just without the debt.

      • 0 avatar
        danio3834

        The thing about having a “good” credit score is that you’re encouraged to make poor financial decisions to get it. A “good” credit customer doesn’t make the best financial decisions, they make the most money for the lender.

        You can have all the money and assets in the world and have a poor credit. It takes debt to make “good” credit, and debt can quickly turn into a virus.

        • 0 avatar
          bryanska

          Yes, exactly. A long history of cultivating and paying debt. I agree it’s an odd way of assessing financial health. I think it’s better described as “good debt management history”.

          • 0 avatar
            carrya1911

            Some people land in dire straits through no fault of their own. Most, however, end up in dire straits because they put themselves there.

          • 0 avatar
            Ubermensch

            “Most, however, end up in dire straits because they put themselves there.”

            FYI – Here are the top 5 causes of bankruptcy:

            1) Medical expenses
            2) Job loss
            3) Poor/Excess use of credit
            4) Divorce
            5) Unexpected Expenses

            Hardly what I would call a damning list of self inflicted misery. #3 is the only one you could consider to be close to 100% the fault of the bankrupted.

        • 0 avatar
          azmtbkr81

          I recently found out that my credit took a hit after paying off 2 new car loans early within 2 years of each other.

          My 28 year old brother who pays cash for everything including college was unable to secure a loan for a new Tacoma due to zero credit history. He had to have a cosigner even though he makes a high 5 figure salary and has never missed a bill payment in his entire life.

          The experts wonder why Americans are so terrible at managing money; what is the incentive for being responsible if it means you won’t be able to borrow money when you actually need it?

          • 0 avatar
            highdesertcat

            And it gets worse as you age and move up in income, UNLESS you stick yourself in perpetual debt and build a life-long credit history, along with paying a king’s ransom in interest charges.

            That’s what America’s financial system is based on; perpetual consumer debt.

            Once people get past the age of 55 at which age many of them retire and start to pay cash for everything rather than pay interest charges, their creditworthiness actually takes a hit.

            I never had much money, and I never had much debt because I never had much money, and so I couldn’t qualify for many loans.

            People my age tell me that they can still get credit and loans, but at rates similar to those high-risk young people without a credit history.

            That seems kinda screwed up to me. People who have enough money to pay cash for a new car can’t get loans at advantageous rates or without major strings and conditions attached.

            It happened to two people in my extended family, both well over the age of 55.

          • 0 avatar
            corntrollio

            “I recently found out that my credit took a hit after paying off 2 new car loans early within 2 years of each other.”

            Took a hit how? The algorithms for credit scores are somewhat opaque.

            Usually paying a loan on time and as due does not make your credit score go down, so I’m highly skeptical of this.

            In addition, carrying a balance on your credit card does not raise your credit score, but your credit card company may think highly of you for doing so.

          • 0 avatar
            corntrollio

            “Once people get past the age of 55 at which age many of them retire and start to pay cash for everything rather than pay interest charges, their creditworthiness actually takes a hit.”

            I’m calling shenanigans on this. If you have lower utilization of available credit, if you’ve been paying as due, and if you’ve had a larger variety of types of accounts as you naturally tend to acquire as you age (e.g. revolving debt, term loans, etc.), then you should have a higher credit score. Also, if you’ve had the same credit relationships for over 20 years, the average age of your accounts should be quite high compared to any young person.

            My guess is that you’re trying to generalize from those two people’s bad experience to the general population, because you’re not giving a sufficient basis for the claim and not giving sufficient information. For all you know, those people paid some items late or had too many credit inquiries, or have high utilization on the very few credit instruments they have.

          • 0 avatar
            azmtbkr81

            “Took a hit how? The algorithms for credit scores are somewhat opaque.”
            I ran a credit report and under the “potentially negative items” it noted that I had not maintained the loans through their full term.

            When I checked my score it was lower than it had been a year before so I have to assume that the only two negative items on the report were the cause of this lower score.

          • 0 avatar

            “My 28 year old brother who pays cash for everything including college was unable to secure a loan for a new Tacoma due to zero credit history.”

            RUle #7 NEVER COSIGN FOR ANYTHING.

            ESPECIALLY A STUDENT LOAN.

          • 0 avatar
            corntrollio

            I’m pretty sure you’re misreading your report, azmtbkr81. What it probably says is:

            Potentially Negative Items

            Auto Loan Account (Paid Off)
            60 days past due as of MMM YYYY
            30 days past due as of MMM YYYY

            Sometimes it says:
            Potentially Negative Closed

            Auto Loan Account
            60 days past due as of MMM YYYY
            30 days past due as of MMM YYYY

            What you’re being dinged for is the late payments, not paying things off early. Paying a loan early does not in and of itself lower your credit score — there is no provision of the credit score that does this.

            Similarly, it is entirely possible that paying off a loan early will not *raise* your credit score, but that’s different. That may be because your average age of the account is still low if you pay it off early or for other reasons.

            Credit scores fluctuate from time to time. I get mine automatically checked by my credit union every quarter, and it has very little correlation to what’s actually happening with my credit at any given time. Your score is affected by utilization, age of accounts, types of credit, number of inquiries, late payments, etc., and any change in one of those can affect your score. If you pay off your loan and simultaneously close a credit card account, you could be raising your utilization and lowering your credit score that way, and paying off the loan is irrelevant.

          • 0 avatar
            SoCalMikester

            Its not difficult to get credit. At one time I was in the same boat as your brother.

            Even with a few years in at a decent union job, i was rejected for their credit card.

            So I went by Sears at the mall. Signed up for their credit card… I think it had a $300 limit, or something. Bought a couple pairs of socks, paid em off.

            Within a couple months, Discover sent me an application for a card. Took it, used it same as cash, paid off monthly- mostly just gasoline, since its a hassle going inside to pay cash anyway.

            After that? Golden! Now I just have the Discover and a Costco Amex- Both pay me to use them, both get paid in full monthly.

            Both helped immensely when I bought my first condo in 2002.

          • 0 avatar
            azmtbkr81

            @corntrollio
            I never missed a payment. I use autopay so the payments that I did make were always on time. Unfortunately I didn’t save a copy of the report otherwise I’d post the exact text, but the credit agency definitely didn’t seem happy that I paid off 2 36 month notes in 12-18 months each.

            @bigtruckseries
            My dad, who cosigned for my brother, is ex-military with crazy old man strength. My brother would need to join the witness protection program if he ever defaulted on that loan.

    • 0 avatar
      KixStart

      “#1 The banks are giving loans for NEW CARS before USED CARS because their logic is: if you default on the loan, they can take back the vehicle and auction it before too much depreciation sets in.”

      This has baffled me for quite some time. Why not just insist on a down payment commensurate with the depreciation and risk? The depreciation on a new car will be more significant than a used one, either way they can cover themselves with an appropriate down payment requirement. No more of this upside-down business.

      • 0 avatar
        blowfish

        The tough part is your friendly neighbour money lending institutions will always try to shave the down payment abit, until u can buy a car with cash back!
        Soon as the economy tightens up a bit, these folks will be first on your repo list!

        banks dont care is not their own money.

        • 0 avatar
          KixStart

          But money down is the thing that offers a bank the most protection. If the loan is only 80% of the value of the item secured, it’s really difficult for the bank to end up eating a loss.

      • 0 avatar
        Kyree S. Williams

        All lending institutions employ a calculated-risk strategy when funding upside-down loans. Raising requirements to cover those possible losses would probably turn off a good percentage of the buying public that does *not* default on its upside-down loans. In all honesty, the banks consider defaulted loans a cost of doing business. Only when that cost gets to be too high–like during a depression–do the banks raise their acceptance requirements.

        Now one thing I don’t agree with is the draconian practice of loan-stacking, whereby a dealership offers to “pay off your car” by taking it in and stacking what you owe for it on top of your new car loan, giving you no chance of being anything but upside down. Sometimes they don’t even pay off the old car in time, damaging your credit (further) in the process…

        • 0 avatar
          hreardon

          Kyree -

          I don’t know that I would call stacking “draconian”. The fact of the matter is this: if you want to trade in your car early and are willing to roll the negative equity into the new loan, so be it. Nobody is forcing you.

          Now, I will accept that there are always outlying circumstances that force people into a situation where they need to trade early and that may necessitate rolling some negative equity.

          I don’t know if I can necessarily blame dealerships or their finance arms for this practice.

      • 0 avatar

        “Why not just insist on a down payment commensurate with the depreciation and risk?”

        WHAT? You mean force an American to come up with a down payment to prove they can afford the vehicle?

        Then how would they ever manage to sell anything?

      • 0 avatar
        SoCalMikester

        They dont have it. The best most people in that situation can do is get one of those “Tax Refund” deals, since thats the biggest chunk o change theyre going to see all year. Xmas in April, y’all!

        • 0 avatar
          corntrollio

          I have always thought of tax refunds, for people who don’t know better, as a forced savings mechanism (mortgages also function as forced savings for some people).

          I know I’ve been successful when I owe money to the government in April, with bonus points for approaching the maximum amount possible without paying a penalty, but others don’t see it that way.

    • 0 avatar
      28-Cars-Later

      “One of my clients had a 520 and he ended up leasing a gotdamn Ford 500 for $680 a month with a 21.2% interest rate”

      The fail is strong with this one.

      • 0 avatar
        onyxtape

        I know a subprime friend who just bought a Jetta TDI with 85k miles for $18,000 (so she can save on gas, of course). God knows what rate and monthly payment she’s doing on that one.

        • 0 avatar
          kjb911

          I am officially a believer in karma…my ex has just bought a Hyundai Veloster but because of bad credit and repossessions he had to go to the local scum dealership of Hyundai who finances him at 420.00 a month at 20% sometimes life has a way to show you sometimes the good guy wins

          • 0 avatar
            Wscott97

            @ Kjb911, Although I always feel bad for people who get ripped off with 20% financing, it’s always nice to see an ex get ripped off.
            It was a good feeling when my ex had to refinance his 4-runner after paying it off because his new partner screwed him over.

            I recently helped a friend buy a certified for focus. He has a 780 credit score and they were advertising 2.9% for 5 years on all certified cars. The guy seriously tried to say that he had great credit but not the right type of credit so he was offering 16% financing (best offer). After a good argument and a little scene, we left with 2.9% and double his trade in value.

          • 0 avatar
            corntrollio

            That’s a common scam, Wscott97, and you guys did the right thing by pushing them and making a scene. In addition to screwing you on a trade, dealers are always trying to make money on financing, so they will frequently lie about the actual rate for which you qualify and increase the spread significantly when they think they can push it.

            That’s why I recommend that people come in with outside financing and get dealers to beat it. You can easily get lower than 2.9% from a credit union right now.

            In California, the dealer must tell you your credit score when they run your credit, because dealers used to engage in all kinds of shenanigans and lie to people. I got told by one dealer I was “tier 2″ credit so I couldn’t qualify for 0.9%, and the lowest rate they could give me was 12%. It was BS because I could easily qualify for the lowest rate at any bank or credit union at the time.

        • 0 avatar
          Joe McKinney

          I hope that Jetta has already had the timing belt replaced. If not, this will be due within the next 10,000 to 15,000 miles and your friend will not be happy when she gets the bill.

          • 0 avatar
            kjb911

            I feel pretty luck with my focus granted I don’t have perfect credit at 22 but 4.9% seems like a bargain from what I have been hearing especially when I had nothing to put down and a Jeep that they paid off the balance on with a blown transmission

    • 0 avatar
      28-Cars-Later

      “if you default on the loan, they can take back the vehicle and auction it before too much depreciation sets in”

      The auction is more or less predicated on four factors: (1) the car’s age, (2) warranty eligibility/status, (3) finance eligibility, and finally (4) condition of the car at auction. As a car ages, the importance forth condition tends to rise as warranties simply expire and the ability to finance it changes, but when they are less than say 36 months old or less the first three are much more in play.

    • 0 avatar
      SomeGuy

      Your friend HAD a choice. He didn’t have to lease a car.

    • 0 avatar
      naterator

      “One of my clients had a 520 and he ended up leasing a gotdamn Ford 500 for $680 a month with a 21.2% interest rate because he had no choice at all.”

      I don’t believe it. A decent BHPH lot could have got him something halfway decent for $75 a week. And he could have kept the car at the end of the term. Along with a heck of a lot of cash.

    • 0 avatar
      corntrollio

      The problem is that very few people know at what interest rate they’re actually leasing. Most people don’t bother asking, and when they ask, they get told the “money factor,” and they don’t know how to convert it to an interest rate.

      Interest rate = money factor * 2400.

      It’s 2400 because you take the average amount financed (so it’s 1/2 of capitalized cost + residual), determine it monthly (so 1/12), and it’s a decimal instead of a percentage (1/100). 1/2 * 1/12 * 1/100 = 1/2400.

    • 0 avatar
      tuffjuff

      To be fair, hasn’t the #1 point about new vs used been that way for years?

    • 0 avatar
      KixStart

      “One of my clients had a 520 and he ended up leasing a gotdamn Ford 500 for $680 a month with a 21.2% interest rate because he had no choice at all.”

      I don’t know why I didn’t notice this before. “No choice at all?” Surely he had lots of choices, including “don’t buy this thing,” “buy a used car” and “get a bike from the Goodwill.”

  • avatar
    Robstar

    Interesting…I actually recently bought one, and am nowhere near subprime.

    • 0 avatar
      danio3834

      I don’t blame you. For the rest of us with OK credit, we can turn our low risk into a good deal.

    • 0 avatar
      tankinbeans

      I’m not sure if I’m considered sub-prime, credit last I checked is high 600 or low 700s, and I just picked up a 13 Focus in October.

      I thought that one was on the top 10 list somewhere.

      • 0 avatar
        tuffjuff

        I remember an article (or a comment in an article) on TTAC in the past maybe 6 months that mentioned something like 70% of all Americans are considered “sub-prime,” so I guess this list can’t mean much?

  • avatar
    @markthebike

    As mentioned, no Mitsu? Buying one of them left you upside down for the term of the loan and used ones virtually worthless.

  • avatar

    Right Now, Chrysler/Dodge is trying to get rid of those leftover Avengers in the worse way. I tried to get one of my clients to buy a Dart with the Nav system for $24,000, but his credit wasn’t good enough. However, the dealership offered him enough incentives to pick up a new Avenger for $17,500 (without NAV/moonroof,etc). I said too hell with that. If it had the Nav in it, ok, but other than that – you might as well keep taking the train.

    • 0 avatar
      CJinSD

      Nav or train? Would he get lost commuting to work?

      • 0 avatar
        KixStart

        BTSR:

        You have a strange idea of “required equipment.”

        • 0 avatar
          Ubermensch

          BTSR has lots of “strange” ideas.

        • 0 avatar

          “REQUIRED EQUIPMENT FOR ME”

          #1 Heated Cooled seats with lumbar massage
          #2 NAVIGATION (i don’t care if it’s a Veyron – PUT ONE IN THEIR GODDAMNIT)
          #3 Panoramic Moonroof (or regular moonroof)
          #4 LEATHER.
          #5 Engine > 400HP.

          • 0 avatar
            KixStart

            Get lost easily, do you?

            As far as I’m concerned, if I got along without it for my first 30 years, it can’t possibly be required equipment. Nav didn’t exist for my first 30 years.

            I think I’d have to add the most powerful 3 cars I’ve owned together to find 400hp.

          • 0 avatar
            Compaq Deskpro

            The only required equipment for me:

            #1 Power windows
            #2 Strong junkyard presence (so I can get that leather)
            #3 American
            #4 Engine > 200 HP
            #5 Standard hole for radio

            That’s it, I don’t care if my car didn’t have AC. I’ve probably used it on 4 or 5 occasions so far, and only because someone else was complaining.

          • 0 avatar
            28-Cars-Later

            @Compaq

            Your thoughts mirror my own.

          • 0 avatar
            tuffjuff

            Oh BTSR, I love you.

    • 0 avatar
      icemilkcoffee

      For a low tech car like he Avenger- I would just buy the cheap trim, and spend a $1000 to put in one of those all-in-one audio/DVD/bluetooth/Nav/backup-camera head units.

      On a high tech car it’s more difficult to do that because so many of the car’s functions are integrated into that center screen.

      • 0 avatar
        redav

        “On a high tech car it’s more difficult to do that because so many of the car’s functions are integrated into that center screen.”

        That’s one of the key flaws of MyFord Touch–pretty much all car controls, even AC & (in some models) lighting, goes through it. There is no way you’ll find another unit that would be compatible, much less be able to hook it up properly.

    • 0 avatar
      baggins

      BTSR,what sort of client relationship you have with this person? It’s not clear that you should be giving financial advice.

  • avatar
    Summicron

    Yeah, my credit rating is one of my proudest possessions and we have a Rio5 for a local scooter ’cause I’m stingy.

    And there’s nothing declasse about the Sorento.

  • avatar
    SiracoFTW

    My wife and i respectively drive a Forte and an Optima.My score is 790. Hmm.

    • 0 avatar
      cgraham

      What do you think of the optima? And what trim did you get?

      • 0 avatar
        tuffjuff

        @cgraham

        I, too, am curious. The 2010 Kia Forte I briefly owned (dumped it like hot garbage) was in the shop 7 times for malfunctioning ABS, stability and traction control. And that was only because with my work schedule and the dealership being 25 minutes away I couldn’t have gotten it in there more often to get look at.

        I often wonder, if the first-gen Forte was just that bad (the second gen looks really nice), or if the dealership I went to was that bad, or BOTH? Surely, not all Kias can be that bad?

    • 0 avatar
      Quentin

      And? You and your wife aren’t even datapoints in this because you aren’t subprime buyers. Assuming they did this correctly, they would have removed all the data for vehicle sales that had a buyer that wasn’t sub-prime (you and your wife). The data that remained, the subprime buyers, would have been used to populate this list. The only thing this list says about you is that you’ll probably experience heavy depreciation on your Kias.

      • 0 avatar
        SoCalMikester

        Regardless of how often the F&I guy tells you when theyre trying to sell scotchgard and paint sealer- a car is NEVER an investment. Ever.

        • 0 avatar
          Quentin

          Where did I say that a car was an investment? Most houses aren’t investments when you get down to it (interest, property taxes, insurance, etc are all money you spend on a mortgage that you will never get back… best case is that you can deduct that on your taxes.) You can, though, make choices that minimizes your cost. Depending on the miles you drive, the way you maintain a car, how long you expect to own the car, and what you buy, your depreciation can vary wildly. It should certainly be considered.

  • avatar

    HYUNDAI/KIA will MAKE A DEAL WITH ANYBODY.

    What people seem to forget is that Hyundai and Kia are basically slush funds to suck large amounts of American wealth over to SK in time to bolster their defenses for the upcoming war. They can sell 30 different models of cars here and we can’t sell them anything due to the tariffs.

    Anybody check the trade imbalance with SK lately?

    • 0 avatar
      28-Cars-Later

      Sir, you are truly wise beyond your years.

    • 0 avatar
      wsimon

      The trade imbalance is far more related to recent Korean dominance of the electronics sector (Samsung, LG, etc) than Hyundai-Kia. I would wager that their prominence on the sub-prime market is more to do with their historical dependency on such sales as well as over-inflated production targets. Either way, the point is clear: if someone has poor credit, its prudent to avoid any sub-prime deal, in cars, houses, whatever. The same saying for casinos works for mortgage companies: the house always wins.

    • 0 avatar
      NotFast

      Do you have any proof of this? Sounds pretty tinfoil-hat-ish.

    • 0 avatar
      sitting@home

      And in the event of a war, which country’s shiny new jets, AEGIS destroyers and cruise missiles will South Korea be purchasing ?

      • 0 avatar
        chrishs2000

        Win. A $200 million F35 will balance it quickly.

        • 0 avatar
          redav

          Why buy one when you can get two for twice as much?

        • 0 avatar

          “A $200 million F35 will balance it quickly.”

          Oh please…NO ONE WANTS THE F22 or F35.

          You keeping up with NEWS from Australia? they turned it down. It’s too expensive and WE AREN’T HAVING AIR WARS WITH THE TALIBAN.

          When’s the last time you saw a pitched dogfight between America and another country NOT in a Michael Bay movie?

          They tried to use the F22 in a ground attack role in Afghanistan trying to JUSTIFY ITS COST by claiming it could “detonate IED remotely”.

          Using an F22 or F35 for ground attack is like using a Lamborghini Aventador as a pickup truck.

    • 0 avatar
      corntrollio

      Yes, it’s easy to check:

      http://www.census.gov/foreign-trade/balance/c5800.html

      It’s not that far off of 2005 or 2009. Note that our free-trade agreement was signed in 2007, and there were auto-related changes made in 2011. You sound a little tin-foil hat.

    • 0 avatar
      bd2

      You like to keep repeating the same spiel even when it’s not true.

      Yes, Kia resorts to selling to more sub-prime borrowers, but not Hyundai.

      And the domestic automakers are free to sell any vehicles in Korea (just as the Germans and Japanese do successfully, esp. the Germans – the Korean market is one of their most successful and profitable markets – more so than Japan).

      And while there is an 8% import tariff, that will soon go away and it’s lower than what the EU has on auto imports (funny how you don’t ever seem to complain about the Europeans) and as well as Australia until they recently did away with theirs – a 10% rate.

      Conversely, the US has a 2.5% tariff on cars and a whopping 25% on trucks.

      Also, GM Korea has about the same share of the Korean auto market as Hyundai and Kia have of the US auto market.

  • avatar
    CJinSD

    I’m surprised no Hyundais made the list. When we looked at the Genesis 5.0R, the dealer bragged to us that they’d just acquired high tier lease financing for someone with a 540 rating. Come to think of it, maybe that’s why they don’t have a high sub-prime percentage.

  • avatar
    CJinSD

    Is there a break down on the percentage of each model that is being financed sub-prime? The Dodge Ram being on the list might not be a big deal if this list is in absolute numbers sold, but if it is percentage a of vehicles sold, that is a lot of trucks out on risky paper.

    • 0 avatar
      KixStart

      Then again, Chrysler did make this list with 4 vehicles.

      • 0 avatar
        CJinSD

        Three of them are place-holders until FIAT gets their pound of flesh or introduces competitive models. They can either only build what the rental companies will take or market them to anyone that doesn’t have the option of buying a car that is class competitive. The Focus being on the list is probably more significant. It isn’t supposed to just be the result of Ford going through the motions, but it turns out that the 55% of Focuses that aren’t rental cars have a high percentage of buyers of last resort. The market isn’t buying the hype.

        The Ram is Chrysler(and Fiat too?)’s best seller. It represents a pretty sincere effort to compete with Ford and Chevy for the high-transaction truck customers that make them profitable in good times. If they’re instead going to people that have to spend all their money on money, that isn’t good.

        • 0 avatar
          KixStart

          You’re not making that sound much better than I did.

          I can see why Chrysler hit 3 times… those can be obtained new for a reasonable amount of money; they’re going to appeal to people without much means. The Journey looks like a half-decent alternative to a real minivan, in fact.

          With any luck, those vehicles will hold together for the life of the loan. This isn’t the worst possible decision a car buyer with a low credit score could make.

    • 0 avatar
      sunridge place

      Its absolute numbers from subprime buyers going through the source of the report. The report is footnoted as follows:

      The CarFinance.com Top Ten Lists represent the top models purchased by the thousands of car buyers who received financing via CarFinance.com between October 2012 and March 2013.

      • 0 avatar
        CJinSD

        Thanks. It seems like usually such lists account for total sales of a vehicle, although obviously there is a correlation anyway for the ancient Mitsufiats.

      • 0 avatar
        sunridge place

        Derek did properly state that this is a snapshot–a small one at that. The footnote referenced ‘thousands’ over the last 6 months. I’m guessing it would have said ‘tens of thousands’ if that was the case. So, this is an accurate count of a very small % of the subprime deals over the last 6 months.

        I’m guessing there is no good source by model overall. The credit bureaus (Experian etc) can see the lender/credit score/finance rate etc but not the vehicle or even the brand in some cases as far as I know.

        Of course, even a report like that wouldn’t account for cash sales.

        • 0 avatar

          Sunridge, there may be. I am working on it. It’s a long shot but I am asking around.

          • 0 avatar
            sunridge place

            Good luck…I hope you can dig up something. Steve said it best down below–the OEM captive lenders and other competitors have zero desire to share this for competitive reasons.

            Santander has some interesting stuff (but no real detail) here:

            https://www.santanderconsumerusa.com/investors/sdart

            Experian Automotive does a quarterly report that has some interesting stuff–but not everything.

  • avatar
    28-Cars-Later

    Good info, the Ram was the only standout to me, but I suppose in the stripped work-truck edition I could see it in sub-prime. Surprised W-body Impala and Lancer aren’t on this list.

    • 0 avatar
      Summicron

      “the stripped work-truck edition”

      For which your scarlet letter is the plastic snout.

      • 0 avatar
        George B

        All RAM 1500s wear a plastic snout, but the higher trim levels get a coating of paint or plastichrome.

        I like the RAM pickup. Attractive and fuel efficient. It’s the pickup I’d buy new with my own money.

        Not too surprised by the other cars on the Sub-Prime list. Here in the Dallas area those cars use the extra loud TV commercials emphasizing low monthly payments. The more desirable the car, the less noisy the commercial. The most desirable cars have no commercials at all.

    • 0 avatar
      Toad

      It’s possible that some of the Rams go to contractors that deal in a lot of cash; their credit scores don’t show much legitimate income but they are more than capable of making the payments.

  • avatar
    KixStart

    I think this is relevant today:

    http://gm-volt.com/forum/showthread.php?41481-Want-a-new-volt-but-need-help

    Subprime loans will be a major fact of life until more people get in touch with the difference betweeen “want” and “need.”

    • 0 avatar
      highdesertcat

      A very astute observation, indeed!

      However, in much of America you need “dependable” transportation in order to commute to and from your job(s), if you are fortunate to have a job or jobs in the America of today. Many do not, and even more jobs have been eliminated for a variety of reasons.

      Many of these subprime loans may actually be driven by “needs” because if “wants” ruled the day, these subprime borrowers wouldn’t buy this crop of best-selling low-enders.

      Mind you, I did not say el-cheapo, because these are not el-cheapos; just low-enders. El cheapos built in China is what we need imported into the US, ever since Hyundai/Kia got pretentious and jacked up their prices on par with those of Toyondasan.

      Volt’s Pamela Fletcher was on Bloomberg this morning and she must be the force behind the link you gave us. But taken in context, the 87K EVs that were sold in a market of 13+ million SAAR new cars is insignificant.

      • 0 avatar
        corntrollio

        Hang on there, Derek once said that diesels were 0.5% of SAAR for 2012:

        http://www.thetruthaboutcars.com/2012/01/diesel-sales-up-27-percent-in-the-u-s-says-oem-sponsored-advocacy-group/

        If EVs are 87K out of 13M SAAR, then that’s 0.67%. Take that, petro-hipsters!

      • 0 avatar
        KixStart

        Well, the story on that link struck me as goofy for a number of reasons. 1) The Volt intender clearly couldn’t afford the car. 2) Had approached his parents (at the age of 26). 3) The advice he was getting wasn’t (mostly) “get a clue, Junior,” but “Did you look into leasing?” or “Go back and ask you parents more nicely – or insistently.”

        The entire dialogue was completely out of touch with the much more realistic, “What part of $35K gross income does not buy $30K cars do you people not understand?” Some of that is just GM-Volt people are totally wacked out, anyway.

        As you say, dependable transportation, in the form of a privately owned car, is often a must. For somebody who needs that dependable transportation (and I think this is an underappreicated problem in the US, especially for the relatively poor), given that the used market is pretty expensive right now, there are a couple of decent options, like the Versa or maybe the Mazda 2. These aren’t enthusiast cars but people who don’t have wrecked credit can get one and probably manage 5-year loan payments (which would be the length of the warranty) and then, we would hope, keep driving without a payment for a few more years.

        • 0 avatar
          highdesertcat

          Kix, I’ve got grand kids that can’t get loans for new cars even though they got jobs — one is in the US Marine Corps at Camp Pendleton. He gets paid more than subprime borrowers who work at McDs.

          That’s why I have been pitching in and buying them a new car outright. They needed the transportation.

          In 2011 I went 50/50 with my son to buy a 2011 Elantra for my grand daughter, for college.

          In June 2012 I bought my grandson at Pendleton a 2012 Wrangler upon his return from a WestPac, and permanent stationing at Pendleton until his discharge in June 2013. He promised to pay me back, but he’s my grandson…. He doesn’t have to. He just got his inheritance early.

          When I was young and poor and forced to buy used, my experiences sucked.

          Invariably, when you buy used, you buy other people’s problems because if they were happy with their ride, they wouldn’t trade it off.

          So I don’t think the dialogue was out of touch because I heard similar in my family for decades.

          • 0 avatar
            sunridge place

            I doubt your grandaughter has much income to get a loan. She’s going to college–good for her and it will set her up for a good future.

            Your grandson in the Marines? He tried to get a loan in June 2012 with a discharge date in June 2013? I’m sure he’s a good kid. If I’m a bank, I wouldn’t loan him money to buy a car. How does he earn money in July 2013 to continue to pay the loan back?

            Lose the idea that these subprime people work at McDonalds. Those people go to BHPH places.

            http://dealers.americredit.com/product-offerings/subprime-auto-loans.aspx

            Our subprime customer*

            Credit Bureau Score Range 500 – 800
            Average Annual Income $65 – $70 k
            Average Years at Present Employer 7
            Average Years of Credit History 13
            Homeowner 44%
            Average Loan Amount $21,300
            Average Down Payment 12%
            Average Term (months) 70
            Average Loan-to-Value (wholesale) 108%
            New/Used Collateral 51% / 49%
            Average Mileage at Origination 27,500 miles

          • 0 avatar
            highdesertcat

            The grand daughter has a college job plus fri-sat-sun at McD’s. Brings home ~ $500/wk in pocket change/funny money and has zero expenses since I pay for most of her expenditures, books, all of her food and gas.

            Ironically, she is inundated with credit card offers! She already carries a credit card from grandma’s business, but hardly ever uses it. And when she does, grandma picks up the tab along with other monthly business charges.

            The grandson didn’t qualify through Jeep financing because of his time remaining in service, but who is guaranteed to have a job nowadays?

            I am certain that my grandson will have a job once he gets out of the Marines because my wife’s dad will put his narrow ass to work around his college studies, including working on the weekends.

            Subprime borrowers can also lose their job at any time, just like anyone else. Then who’s gonna make the payments?

            Besides, he will be going to college full-time under the VA benefits, after he gets out. In this area that is four days a week and he doesn’t have to commute since he can go on the military base nearby.

            Under assets, he has the house that my wife’s dad bought for him a few months ago, free and clear, and under liabilities/debts he has zero.

            But all of this is a moot point. We handled their need for vehicles the only way we could by just pooling money and paying for it. And we will do the same for the grand child that graduates next year. And the one after that, etc.

            We don’t want to have our grand kids hobbled by debt and we want to give them every advantage we can to get a leg up on their competition in life. We’re no different than anyone else who bleeds for their kids. And many parents and grand parents do. We’re not unique.

            And we will do that for as long as we can or until we run out of money because I never had any advantages handed to me and to get where I am today was really, really tough. So I’m a believer in doing what I can to get them a solid head start.

          • 0 avatar
            sunridge place

            Nothing wrong with any of that…but don’t bitch and moan when a bank won’t give them a 3-5 year loan on a new car.

            Funny money?? More power to her. Doesn’t sound like its exactly income that can be verified.

            The HDC ‘guarantee’ that the grandson will get a job or be supported by the family business? Good for him…Want a bank loan? Then have the parents co-sign the loan…the banks will line up for that business.

            Your perception of the majority of current subprime customers through true automotive finance companies (Not BHPH) is wrong. Its not McD’s workers.

          • 0 avatar
            sunridge place

            One more point that annoys me and shows a fundamental lack of understanding of the credit market.

            ‘Under assets, he has the house that my wife’s dad bought for him a few months ago, free and clear’

            That’s great. First of all, he didn’t have that in June 2012 did he?

            Also, guess what? A bank financing a car has ZERO access to that ‘asset’ if he defaults on a car loan…even if that asset in his name.

            If he really wants a car loan on his own, put up some real collateral and see if he can borrow 28k against that house asset to buy his Jeep. Then he has some real skin in the game.

            I’m sure he would repay it based on what you say…just don’t expect a bank to grant him a loan based upon your feeling about his ability to repay a note.

          • 0 avatar
            highdesertcat

            “just don’t expect a bank to grant him a loan based upon your feeling about his ability to repay a note.”

            And that is where you and I differ since history is rife with examples of NINJA loans, and subprime lending is no different since ANY subprime borrower can lose their job or income at any time.

            In addition to that, college students are offered unsecured loans without ANY visible means of income. So your argument doesn’t hold up.

            We could have pushed the issue and gotten the kids loans without a co-signer, but we chose to handle it by just buying the vehicles outright. The Wrangler was $24K and my share of the Elantra was <$10K.

          • 0 avatar
            sunridge place

            I should know better than to try and discuss finance items with you and I’m not going to spend too much time showing how tuition loans are different than a car loan.

            But, here’s a hint. Most are backed by the Federal govt. They also cannot be discharged during bankruptcy and are one of the few loans where your paycheck can be garnished by the feds if you don’t repay. Try getting a garnishment on an unpaid car loan.

            True private college loans carry a higher % rate and…guess what? They usually require a co-signer (parent)

            Of course subprime people can lose their job. Prime customers can too.

            When properly done, subprime auto lending is no riskier than prime lending. The higher interest rates account for the higher default rate.

            I’m not knocking you. My grandfather gave me my first car too when I turned 16. I drove it for 8 years. It helped me get a step up in life as I needed a car.

            Just don’t cry foul when a lender sees someone with 10-15 years of credit history and employment with a dinged credit rating as a better candidate than your granddaughter or grandson. These subprime loans being discussed are not going to $9/hr McDonalds workers or unemployed welfare candidates to buy new Camaros or Jeeps. Those people go to BHPH places–or, like you, have a family member help them out versus a bank.

          • 0 avatar
            highdesertcat

            I’m not knocking your convictions either. I just do not agree with your premises or posits on subprime lending.

            Subprime lending is let selectively, usually to a protected group. There is no equal opportunity in lending.

            Subprime loans have caused a lot of problems in the past and will continue to do so with this new crop.

            And that’s what makes the world go ’round. Differing view points and different avenues to problem solving.

            “I’m not knocking you. My grandfather gave me my first car too when I turned 16. I drove it for 8 years. It helped me get a step up in life as I needed a car.”

            And I bet that helped you a great deal, as it was intended to do.

            BTW, the credit card offers I referred to were unsecured since there is no Federal guarantee or tuition assistance for many of those kids getting the offers.

            Several of them have their parents/grand parents pay their way, or have secured grants from the George S. Brown foundation, or USAA or some other military-based assistance.

            I don’t know anything about Federal loan guarantees. We never applied this time because we never qualified when our kids went to college, nor when my wife went to college 1980-1985.

            My wife got her BS under a grant based on my military service, and I got my BS and MBA with tuition assistance from the Air Force, while on active duty.

            I never had to pay anything back to anyone, although I had to borrow money from the Credit Union for my books.

            I paid that back. But I never did get to use my VA benefits because I could not use tuition assistance AND VA concurrently.

            And at that time I could not pass those benefits along to my children or grand children.

          • 0 avatar
            sunridge place

            I assumed it was college loans you were referencing because I didn’t think anyone would try and compare a Visa card to a college kid with a $300 credit limit and 29% interest rate to a car loan for $24,000….silly me.

            Show me a college kid with no income with a $24,000 credit line on their credit card and then I’ll compare the two.

            You are trying to compare the damage caused by subprime home lending to a potential problem with automotive subprime lending. The two are NOT the same and you seem to be unable to understand that.

          • 0 avatar
            highdesertcat

            The grand son has a $20K limit on his BoA World Mastercard and a $15K limit on his Discover card, both with a zero balance, and both in his own name. Had them since he joined the Corps in 2009.

            The business credit card for my grand daughter is in her name, as are all the cards we carry from the business are in our individual names. Easier to track individual expenditures that way, i.e.

            SALLY HOMEMAKER SIXPACK
            Ding Dong Real Estate Corporation, Inc.

            or

            JOSEPH TALL SIXPACK
            Ding Dong Real Estate Corporation, Inc.

            There is no credit limit, and they’ve never questioned, checked or verified $3K or $5K purchases I made buying building materials.

            I’m sure you guys know what you are talking about, but it doesn’t quite mesh with my real-life experiences in the my corner of the real world.

            Maybe your neck of the woods is different? Is it even America?

            I’m sure there are lots of other people who have experiences different from yours. Some of the comments reflect that.

          • 0 avatar
            sunridge place

            The grandson is not a college kid with no income. You are mixing examples.

            He is in the military with income. He just didn’t get a car loan because his future income is in doubt.

            Let him carry a balance for awhile and make minimum payments or perhaps be a few days late and watch that limit drop like a rock.

            The granddaughters credit card is tied to the business…not her. She’s not personally liable for the debt (in the credit card company’s eyes) should she default.

            I tried to find an example of a subprime automotive lender that went out of business during the crash of 08/09 but couldn’t find any examples. GMAC crashed due to mortgages and Chrysler Financial was tied to the sinking ship of Chrysler.

            Of course, I can easily list out the lenders that crashed and burned due to poor subprime lending in the mortgage business.

          • 0 avatar
            highdesertcat

            “The granddaughters credit card is tied to the business…not her. She’s not personally liable for the debt (in the credit card company’s eyes) should she default.”

            No, that’s not how it works for our cards. It works similarly to how government-employee credit cards work, i.e. Diners Club, Amex, Fleet, Visa, Mastercard, etc.

            Each employee has to apply under their own name and has to qualify on their own merits, even if they have bad or no credit. They are liable for their own account. There’s no recourse against the government because each card has a unique account number.

            If the government doesn’t reimburse you in time to make the due date for your payment, the card holder gets slapped with the interest or late fee. Not the government.

            I carried a government credit cards for years when I was on active duty, and so do my kids who are current government civil service employees.

            I am responsible to pay for what I charge to that card, even though below my name it lists a government agency or department as the employer I represent.

            Ditto with our corporate cards. Each holder is responsible to make payment. It is tied to each individual’s credit account. Each has a unique account number.

            In our case, only one person makes all the payments for the card holders, and that’s usually my wife, or her dad.

            I think we’re talking past each other because you’re not familiar with what I am describing.

          • 0 avatar
            sunridge place

            Very familiar with what you’re talking about…didn’t know that small business type accounts could get the same thing. Never worked for a small business.

            My corporate travel is billed to me. I submit expense reports to my company who direct pays AMEX. I suppose I’m responsible for anything not paid but that never happens.

            Ok.

            http://www.defensetravel.dod.mil/site/govtravelcard.cfm

            It requires a 500 Credit Score to get one and even says that you get one if the ‘credit check is declined’ No income verification. 500 Credit score is deep, deep subprime. There are other factors at play–mainly your company managing your use of that card and their ability to garnish pay or terminate employment if you don’t pay.

            They also have a centrally billed plan which is what I was referencing. The good standing of your family business probably gives them options for individually billed cards.

          • 0 avatar
            tuffjuff

            @highdesertcat

            I mean, what kid in their teens WOULDN’T have credit cards with a combined $35,000 spending limit?

            Anytime you want to quit bragging about your grandkids, I’m all for it. And I’m not alone. Nobody cares.

          • 0 avatar
            highdesertcat

            tuffjuff,

            my initial comment was to kixstart, after which sunridge told me that I was wrong in my observation and experience of what was happening in my life.

            I appreciate you pointing out to me that this is not the venue to carry out such discussions.

            But these are concrete examples that I base my comments on, drawn from real life experiences — not pure fiction or hypothetical mental acrobatics like the comments of some of the participants who base their comments on how things ought to be, or are supposed to be like.

            However, my replies were to sunridge who insisted that what was happening in my life was not happening in my life, as he pointed out the error of my ways, repeatedly.

            I merely gave him more information as to why I drew the conclusions that I did.

            BTW, the “kid’ with the $35K credit line is a Sgt is the United States Marine Corps, currently on active duty at Camp Pendleton and slated to be released from active duty in June 2013.

            It would not be of interest to you that he also has been awarded two Purple Hearts for his combat tours in Iraq and Afghanistan, which is one more than I have for my combat tour in Viet Nam.

            The grand daughter who carries a company credit card has NO limit on her card. She is 20 years old, in college at NMSU, and works at two jobs in her spare time.

            Maybe you can enlighten me as to WHY you choose to read my comments in response to someone else’s discussion, if you don’t care? I don’t read your comments, unless they are directed to me.

            I respectfully suggest that whenever you see my handle anywhere you skip my comments, post haste! This should alleviate all your discomfort.

        • 0 avatar
          corntrollio

          Also, in addition to what sunridge said, there’s a failure to comprehend that “subprime” as a finance category is different than “non-prime”. The reason that the grandkids can’t get underwritten for loans is that they are missing one or more of the following:
          1) capacity to pay (college funny money + imminent discharge)
          2) good collateral (not putting enough down on the car for the risk)
          3) good enough credit for the interest rate

          A properly underwritten loan should show all three, and assuming all of these loans are properly underwritten, those subprime borrowers meet the criteria.

          Subprime is not the same as NINJA if you understand anything about finance. NINJA does not require #1 and #2 to be true in all cases, but it does require #3.

  • avatar
    rdodger

    Our Kia dealership was doing a lot of sub-prime accounts thru Americredit and as far as I know they still are.

  • avatar
    Felix Hoenikker

    There was an article in our the personal finance section of our Sunday paper last weekend that listed the following rules on how much money to borrow for a car.

    1. Do not exceed 20% of your gross income including annual insurance payments.
    2 Never take a loan longer than 48 months. This was the longest term given. Some of sources cited kept the maximum term to 36 or 42 months.
    3. If you can’t put down 20%, stop and save up until you have enough for a 20% down paymnet. This covers the initial depreciation so you are unlikely to be upside down on the loan.
    4. Leasing doesn’t work for individuals unless you have a business to deduct the lease against. This may be US specific advice.
    5. When buying new, don’t trade in until the wheels fall off. Instead, after the loan is paid off, keep paying the car payment into a separate account. By the time that the car needs to be sent to the crusher, you will have more than enough to buy a new one for cash.

    I would add that the current low interest rates (2% at my credit union) is almost free money given the understated inflation rate. So borrowning for 48 months could be a good way to buy more car than you should.

    • 0 avatar
      icemilkcoffee

      Addvice #1 is crazy. 20% of your gross income on your car is way too much money spent on a depreciating asset. The typical lending guideline for a home is that the home mortgage and property tax should not exceed 30% of your gross income. That is for a home. A car should be well under that.

    • 0 avatar
      Stumpaster

      I can’t say that this is a solid advise because it ignores the particular car and ignores the actual costs to maintain older cars. You get an average $30K car and finance for 5 years at low rate. You still pay around $600+ per month. Half way through, you change tires, and hopefully not those silly new pressure monitors. You’re into $1K quickly there. You change belts, fluids and some other stuff. Another $500 easy. Alignment, oil changes, maybe brakes, a part replaced here and there, that’s another $1K or so. So by the time you pay off the loan you’re into $2-3K for maintenance. Now you have a car with about 80K miles and “no payments”. Nice, if it is a Honda, Acura, Toyota, the usual suspects. But one fail, one slip, and you’re into thousands more. So now you have maybe a $1K per year maintenance budget. And the car keeps on getting older. And then you need a head gasket job or something like that.

      Or you could’ve leased same car for $300/month and walked away.

      I bet you that with people who don’t have experience with cars, and cannot wrench their own rides, i.e. the absolutely dominating majority of drivers, lease makes eminent financial sense. And that’s before applying “subjective” factors such as your clients or co-workers seeing you drive an old car. That has value depending on a person’s profession.

      The reality is more along the lines of: Tier 1 leases a car and beats the crap out of it, walks away looking forward to a new leased car; Tier 2 buys that car as a CPO and beats the crap out of it since the warranty is till 100K miles; Tier 3 buys that car after Tier 2 traded it in for another CPO and tries to catch up on maintenance that Tier 1 and 2 did not do, gives it to his/her kid to drive in school and beat the crap out of it; Tier 4 buys the car from Tier 3 and puts plastic tint on the windows and makes the car all bling-like; Tier 5 buys that car from his Tier 4 older cousin and in the end pays $50 for a tow to the junk yard.

      • 0 avatar
        gessvt

        TL/DR:

        a) A perpetual lease payment

        b) Perpetual repairs on a clear titled car.

        Take your pick. And no, “defer maintenance and repairs since I’m getting a new car soon, seriously” isn’t an option.

      • 0 avatar
        Toad

        Terrible financial advice. Leasing keeps the buyer on a perpetual payment cycle that never builds equity and never ends. No financial planner would suggest leasing is a smart financial strategy for the vast majority of car buyers.

        Buy a quality car that has the lowest payment possible, treat it well, pay it off as early as possible, and keep it until it is no longer reliable. For 90% of buyers (new or used) that is the simplest, best advice for keeping your car expenses to a minimum.

        Rich people lease because they can afford to; different rules when you have FU money. For almost everybody else leasing is perpetually financing a depreciating asset.

        • 0 avatar
          bunkie

          Equity? In a car? Cars are disposable, depreciating assets. Whatever equity you have is declining. They should be treated as what they are: an item that serves a purpose but that is carried as an expense balanced against that function (some of which is pleasure, the relative importance of which is up to the individual).

          • 0 avatar
            Toad

            If you don’t owe money on a car and it has some value you have equity. Just because it is slowly depreciating does not make it worthless. You have to weigh the balance between making a payment vs. maintenance expenses.

            Virtually every financial advisor would tell you to keep a reliable paid for car instead of taking on more debt.

    • 0 avatar
      bryanska

      That’s a horrible personal finance writer. It completely ignores the interest rates, which make it much wiser to shovel money elsewhere.

      A 20% down payment and <48 month term mean GOBS of money diverted from investment. You're forgoing 7 to 8 points of market growth in favor of avoiding 3 points of interest. STUPID. Of course these rules might make short-term sense in preserving cash flow for the paranoid and financially clumsy.

      The truly wealthy play the long game and stack hundreds of smart financial decisions into a long marathon to riches. At <3%, financing for 72 months (and keeping the car that long) is sweeter than leasing. Buy a smart sedan at a low rate. Watch that payment shrink in real terms as inflation comes back. Don't pay off early. Pile as much money as you can into a diversified portfolio.

      And don't think this is bad advice if you lose your job. You can't get a job without a car. So use the low 72-month payments to 1) save for emergency payments, and 2) relax knowing the low payment will be easier to handle if you get laid off.

      Buy the cheap loan/lease payoff coverage through your auto insurer. It costs relatively little.

      Lifehacker put a similarly stupid article up two weeks ago. I gave the same advice and was pounced up on by people for promoting debt. When I showed them the numbers, someone snarked, "congrats for winning the game of life" like that was a dirty pursuit.

    • 0 avatar
      KixStart

      “So borrowning for 48 months could be a good way to buy more car than you should.”

      If we stopped buying more car than we should, or at least need, the auto industry would collapse overnight.

      Some of that advice is somewhat hard to follow, though. As noted elsewhere, dependable personal transportation is a requirement. Just because you have a low/minimum wage job, doesn’t mean you don’t actually need a reliable car.

    • 0 avatar
      BigFire

      Regarding #5… When I finally got a new car back on ’05, the previous car was a hand me down ’92 Camry wagon. It had significant frame leakage that gathers water whenever it rains. Thankfully down here in Southern California, it doesn’t rain that often, but when it does, I know all too well. So in that event, my case qualified.

  • avatar
    toxicroach

    I don’t get the point of paying $2 grand for a Nav system that will look dated in 5 years, and can be replaced by a $100 GSP unit or your phone.

    • 0 avatar
      Quentin

      Most Nav units are not $2k anymore. Since display audio systems are becoming so prevalent for infotainment, the additional cost of nav is pretty small. I recently purchased a Prius v (station wagon), so I can speak to the trim differences and Nav cost difference. The main difference between the Two and Three trims is the display audio system versus a display audio system with Entune and Nav. The cost difference is <$800.

      My wife demanded the dual pane moonroof that forced me to the Five trim and the Advanced Tech Package. We can afford it and she's happy, so I'm happy.

    • 0 avatar
      icemilkcoffee

      Your phone’ GPS stops working when you drive somewhere where the reception is poor. Also- you are forgetting that you have to pay an extra $15-$20 per month for the unlimited data plan.

      A 5 year old GPS unit maybe slightly dated looking, but it’s still perfectly functional.

      • 0 avatar
        Quentin

        It does and it doesn’t. My iPhone 5 caches the route and I can zoom in and out to an extent even after I’ve lost cell service. The GPS antenna still works without cell service. (Assuming you start your journey with signal.). You can’t search POIs and non-cached info, though, without cell service.

      • 0 avatar
        MeaCulpa

        Or get a Nokia Lumina 920 and download all the maps you want at home.

        Don’t get me wrong, I do like the look of a factory fitted navigation unit, but most times a navigation system isn’t needed (I did manage to cross europe north-south without a GPS and ended up just in the right spot in Italy) and most daily trips I know where I’m going with my eyes closed. The factory fitted navigation system doesn’t evolve nearly as fast as apps or even stand alone units and a lot of nifty features will never make it’s way into the factory unit in your car. If I worked as a salesman or some other profession where the car was a tool and replaced often at somebody elses expense I’d tick that box in a heartbeat. For a daily driver and keeper I do think that a phone is better than factory fitted especially if you subscribe to spotify, listen to audiobooks or podcasts a lot.

    • 0 avatar
      chrishs2000

      The in-dash navi in our 2008 TSX is dated, but it still looks 1000 times nicer than a stupid Garmin hanging off of your windshield and makes the entire cabin feel more luxurious.

      • 0 avatar
        KixStart

        “The in-dash navi in our 2008 TSX is dated, but it still looks 1000 times nicer than a stupid Garmin hanging off of your windshield and makes the entire cabin feel more luxurious.”

        It doesn’t look any nicer than a TomTom in the glovebox, which is where it sits 99% of the time. I only need to stick it to the windshield when I go someplace unfamiliar, which is pretty rare.

        The money I saved feels quite luxurious in my Schwab account.

    • 0 avatar
      highdesertcat

      toxicroach, we have one of those fancy Nav systems integrated into the dash of my wife’s 2012 Jeep Grand Cherokee Overland Summit.

      Never used it!

      It came with this Grand Cherokee. We had no choice, if we wanted to buy that particular Grand Cherokee, which we did.

      We have no need for a Nav system. We know where we are going and where we came from. Yeah, even on long trips.

      • 0 avatar
        Kyree S. Williams

        Chrysler Group loves to lump in the navigation system and make you pay through the nose for it, especially that SIRIUS-based one. I’m a fan of Ford’s modular system, whereby cars with MyFord Touch can be equipped with navigation simply by purchasing the navigation-map SD card from the dealer. It’s too bad that MyFord Touch itself is rotten in application…because none of the other automakers have a universally-upgradeable system like that. But they should.

        • 0 avatar
          highdesertcat

          Kyree S. Williams, yeah, I think the package that included that Nav system and SatRadio, along with some of the other crap we never use, tacked on $5500 to the MSRP.

          A lot of things come standard as you move up in trim level, but it really is just added packages. Once you reach the top trim level, ALL of their packages are included as “standard”.

          Hopefully, when we trade it for a new vehicle, maybe those added frills will also add to the value.

          In reality, I doubt it. That’s why I didn’t trade the Highlander even though the Jeep dealer begged us to. It was worth more to me than the top trade dollar they were offering me on paper.

          My wife’s nephew has a MyFord Touch. It’s pretty nifty if you can work it at a dead stop or in the drive-way. But while driving? Not so much.

          I agree that if the automakers offer such amenities, they should be upgradeable to keep up with technological advances and improvements, you know, like re-flashing the EEPROM in the engine control module to get the latest and greatest firmware from the manufacturer.

        • 0 avatar
          danio3834

          You cannot simply activate navigation in a MFT vehicle by inserting the SD card to my recent knowledge.

          The control modules on VINs ordered without nav are not configured to read the card and there isn’t a supported method to reconfigure it. some vehicles don’t have all the needed hardware either.

          The new Chrysler media centers that support nav for 2013 can however add it after the fact.

        • 0 avatar
          tuffjuff

          @Kyree

          Interesting. Several CJD vehicles I’ve looked at recently all show nav around $800-900, which is the absolute lowest cost I’ve ever seen from any automaker.

          The Jeep Grand Cherokee Limited I’m looking at, it’s $895 and includes some other stuff besides the nav, and for kicks I looked at a Charger/300 and it was $895 on them, respectively, as well.

  • avatar
    Onus

    This. I have no credit at 20 as i have never had to have loans for school, or anything i had to get. I went to a local community college to save money.

    I also have a fairly decent chunk of change in the bank that i saved while working.

    What the heck do i need credit for? If i wanted to buy a ton of crap i didn’t need i could do that with cash tomorrow.

    I did just get a credit card and I’ll use it to pay my cellphone bill so i can build up my credit score. Set it to auto pay and I’m set. Maybe in the future i will want to get a loan on something. I hope not. All cars i will be driving for the foreseeable future will be paid in cash.

    • 0 avatar
      Domestic Hearse

      Credit is a financial tool. It is not inherently evil. When abused, it gets you into trouble, yes. But when wisely and responsibly used, credit can help your life in many ways.

      You already have the right mindset, Onus. Read the fine print on everything, pay as you go. But I encourage you to open several lines of credit now. Pay as you go, don’t max anything out. Choose programs with rewards — my wife and I use a reward card for everything and pay off the balance each month; we fly pretty much for free.

      Someday, you will want a solid credit history, whether to apply for a new business loan, or take out a mortgage, and yes – maybe buy a car.

      In fact, I have a brother-in-law who has become a very successful entrepreneur. Hard work, yes. But also his understanding of finances and the use of credit (otherwise known as Other People’s Money). He’s become a millionaire, once he learned how credit works. Check out Donald Trump’s history – he’s built an empire out of chutzpa and OPM (credit/loans). Start learning how this financial tool works now.

      • 0 avatar
        hreardon

        Domestic -

        Good points there. Credit and finance are tools and wealth is built either through luck, knowing how to leverage those tools successfully, frugality, or a combination of those three (take your pick, B&B…).

        Now, when we’re talking about cars one of the key things to remember is that they are depreciating items. If you’re interested in building wealth then things like cars, boats and planes are terrible purchases.

        If, on the other hand you are building a business, then the wise use of other peoples’ money can be smart.

        • 0 avatar
          Skink

          “…wealth is built either through luck, knowing how to leverage those tools successfully, frugality, or a combination of those three (take your pick, B&B…).”

          Good start. I’d add to that list of two or three things: working hard, being kind, and keeping current with your profession.

      • 0 avatar
        Onus

        I figure I’m on to a good start. Works good for me now. I know I’m using other peoples money to my advantage. Now just to use it to that perfect advantage.

        I got one credit line open for now. Once i get a score I’ll probably pick up a amazon card, and a delta card. Seems to be where i spend most of my money.

        In the last year I’ve spent $2000 just on flights alone. I got the travel itch.

        Right now I’m not interested in entrepreneurship i was for awhile but once i get a steady job again I’ll start writing my ideas down.

    • 0 avatar
      chrishs2000

      That’s a perfect attitude if you’re content living in your mother’s basement and retiring at 65 with only your social security pension. I guess you didn’t take any finance classes at your community college.

      • 0 avatar
        Summicron

        @chrishs2000

        Who’s approach do you think will actually result in the lad wanting to learn more about finance, Hearse’s or yours?

        It’s not like you’re talking to the deadbeat over on the pay-for-my-vaction thread.

      • 0 avatar
        ajla

        I must have missed the clause in my 401(k) that stated I need a 48 month auto loan before I could contribute.

        • 0 avatar
          bryanska

          The point is that a short auto loan means diverting money from that 401k. If you take the 72 month note and invest the difference from the 48 month note, you’re getting 7 percent return instead of paying off a measly 3 percent loan. Do that seven or eight times in your life and the difference is significant.

          Buying an expensive car may be a luxury, but so is hoarding cash and buying depreciating assets.

          • 0 avatar
            ajla

            And, if you have neither the 72 month auto loan nor the 48 month auto loan then you have ALL your money to put into investment activities.

            You’re also making the assumption that most will qualify for 72mo @ 3% or less.

          • 0 avatar
            sunridge place

            @ajla

            I think the point is that instead of pouring cash into that 401k, he is pouring it into a savings/money market account (earning crap interest) to prepare for the car (or whatever else) he needs and is so proud to be able to with pay cash.

          • 0 avatar
            Onus

            I know i should probably invest my money.

            But, for right now quick access to cash is more important. Sure i lose on inflation but i can also decide to take a vacation tomorrow if i wanted to. I don’t live wondering how I’m going to pay for anything. It’s a secure feeling.

            I don’t have a 401k to pour money into or a IRA. I’ll be opening a IRA shortly once i get my first full time job.

            Getting a loan on a car that will lose me money seems stupid. Right now i have a car that is fully depreciated and i could sell it for more than double what i bought it for tomorrow if i so choose.

            My car taxes are a joke, and my insurance is dirt cheap. Next year I’m moving to Early American plates here in CT which reduces my vehicle tax to $20 a year.

    • 0 avatar
      SoCalMikester

      You might eventually want to buy a place to live. Having good credit helps a WHOLE lot. Autopaying the cell bill is an excellent idea- Thats how my Virgin mobile ($25/mo)bill gets paid. And Netflix on-demand. And internet. No cable bill or landline. And gasoline…

      • 0 avatar
        Onus

        I almost got that virgin plan. Now its $35 which is still a great deal. I’ll be getting the tmobile one shortly, i’m on a older non contract plan that costs more. 100 minutes, unlimited data, unlimited text.

        Thats my reasoning I’ll need a place to live at some point and having good credit surly helps that out.

    • 0 avatar
      BigFire

      Get a credit card with cash back or other bonus. Put EVERYTHING through that card. PAY OFF THAT CARD religiously. DO NOT HAVE A BALANCE.

      There, you’ve just established your credit.

  • avatar
    ranwhenparked

    No real surprises here, Nissan and Kia have been picking the low hanging fruit for years, and most of the Chrysler products on the list are their oldest and most dated models that need aggressive finance deals to keep moving. The Ram 1500 is a relatively simple work truck, people who need a pickup for work are going to look for the best lease or finance deal they can find, and if Chrysler is the one hungriest for the business, they’re the ones that those buyers are going to gravitate towards. The Focus is a bit of a surprise, but ultimately, it is still an inexpensive car, not the most inexpensive of the inexpensive cars, but inexpensive nonetheless.

    • 0 avatar
      corntrollio

      People are assuming that the Ram 1500 is the work-truck, but that’s not always the case.

      I sometimes run across guys who work in construction here in California and many are likely to be subprime buyers due to being a bit irresponsible. Some of them have their work truck and their weekend truck. The work truck is a POS beater regular cab, maybe Toyota, maybe Ranger, maybe beat-up old F-150.

      Their weekend truck is often the crew cab (kids in car seats, mang) where they get the cheesy cheap made-in-China blingy wheels, and many of them are Rams. None of these guys would buy a brand-new truck as their work truck — but their weekend truck is all about “style” (not my style…).

      • 0 avatar
        SoCalMikester

        With their familia name on the back window in olde english script? Or their hometown in mexico?

        I have always liked the stickers that reference their “aztec heritage”. LOL.

  • avatar
    jaydez

    I leased my wife a Hyundai Accent last September. She wanted a new car and really liked that car so we got it. When it came time to run the credit the finance manager showed me my score and told me I had the highest credit score he has seen in over a year. That surpised me. I just have good credit, not great credit.

    • 0 avatar
      ajla

      “When it came time to run the credit the finance manager showed me my score and told me I had the highest credit score he has seen in over a year.”

      Interesting if true, but finance guys at car dealers aren’t exactly known for their truth telling.

      He might have thought giving a compliment to your financial status would put him at an advantage later on.

      • 0 avatar
        jaydez

        Based on the conversations I heard that day it didn’t surprise me. I heard one person looking at a Sonata tell his dealer the Nissan place across the street coulrnt help him.

        One of the SALESMEN was having a good conversation right behind me with a corrections officer who was the officer in charge of his block when he was in the joint.

        Most of the customer cars in the lot were the beat up hoopties with plates on them that originated within 6 months of them getting there.

  • avatar
    Steven Lang

    This article offers a lot of healthy debate. But I can tell you from my experiences working for a large auto finance company, and liquidating over 10,000 vehicles a year for them, that this information is as proprietary as you will ever get.

    Capital One, CitiFinancial, Americredit and Santender would never share this information with any publication. Not in a million years. You may as well be giving your competition a cheat sheet.

    I can’t even see large dealer networks that specialize in the sub-prime markets sharing this information with any public source. You could go by a JD Byrider dealership or Drivetime and see what’s on the lot. That would likely be your best source. Or just go to the auctions and see what their buyers are purchasing.

    This is a tough article to write about in so many respects.

  • avatar
    dwford

    The Avenger and 200 are great cars to sell people with bad credit. They depreciate fast, so I can sell a 2011 Avenger with about 30k for $13k, its new enough that the bank likes it, and the customer does too since still has some warranty to it.

  • avatar
    Kyree S. Williams

    I’m surprised, because I’ve read in quite a few places–TTAC being one of them–that GM was doing lots of subprime financing…but not one car on this list is from GM. But aside from the Optima and RAM 1500, I’m not surprised at the cars that *did* end up on the list…

  • avatar
    ajla

    I read through these comments and I wonder what kind of charmed life I must live to be able to drive 20+yo vehicles without suffering constant breakdowns and needing to spend $4K per year in annual transmission and engine rebuilds.

    • 0 avatar
      corntrollio

      Agreed. I’ve had 15+-year old cars without constant breakdowns and never spent $4K in a year on maintenance, even in the year that my first-gen Taurus needed a new transmission.

      The real answer is: deferred or non-existent maintenance.

      You know who you are — you ignore CELs because “oh, it’s just emissions crap, who cares?” You ignore those weird noises coming from the rear axle or the engine compartment. You get the oil changed every 10K, when you remember to do so.

      It’s likely the same people who don’t get pre-purchase inspections and then blame the manufacturer.

    • 0 avatar
      SoCalMikester

      Japanese makes? Or American trucks?

    • 0 avatar
      Onus

      Add me to that club. I can’t do the math and figure out how a new vehicle makes sense.

      • 0 avatar
        bikegoesbaa

        You mentioned above that you spent $2000 on flights last year.

        Can you do the math and figure out how recreational travel “makes sense”?

        • 0 avatar
          Onus

          Gotta have fun in life sometime. :) In the process i got to see The Netherlands, Belgium, and Russia.

          • 0 avatar
            bikegoesbaa

            I don’t disagree, and also devote a sizable chunk of my discretionary income to recreational travel.

            My point is that it is not inherently worse to spend spare money on a car than to spend it on travel or other non-essentials.

            You could actually argue that is is a better financial choice, as cars actually retain their value better than most other purchases. How much does a flatscreen TV or new couch depreciate in the first 12 months?

            Of course, outside of very unusual circumstances the depreciation on travel is 100% and instantaneous. Sure, the experience and memories are priceless to the traveler, but they’re essentially worthless to anybody else.

            Expensive cars also tend to have lengthy warranties and be fully insured, so the risk of a catastrophic loss of value is small compared to just about anything else.

      • 0 avatar
        tuffjuff

        In the area I live in, if you have $10,000 to spend on a used car, you’re getting something 3-8 years old, and pretty much all with 100,000+ miles (not kidding). Move up to the $15,000 price range and that’s where you’ll get something still 3-8 years old, but “only” with maybe 40-50,000 miles.

        If you drive 15,000-20,000 miles/year, $5 more for a new car effectively gets you 2-3 more usable years out of the car before high-mileage concerns kick in, not to mention you know the maintenance history and can often get incentives/lower interest financing on new than you could used.

        The age-old adage of “buying new is always more expensive” isn’t always true, and has increasingly become more and more a myth.

  • avatar
    dzwax

    This is data from one finance company only.

    this is a quote from their website.

    Apply Now for a Car Loan or Refinancing Even If You Have Less Than Perfect Credit

    Are you looking for a new or used car loan? Even if you have bad credit, CarFinance.com can offer excellent financing options. We´ll assist you with tools and resources you need to secure the right car loan for you.

  • avatar
    MeaCulpa

    What I don’t get is the reliance of past performance in credit scoring. If my dear parents lived in the US they would have the crappiest score ever, they buy everything cash, have plenty of savings, have some nonfinancial assets, they paid of their mortgage decades ago and both have decent/good incomes and doesn’t have to provide for anybody but themselves. They are what most people would describe as dream lenders with a risk of default that’s minuscule. I on the other hand have student loans coming out of my ears, a not so great salary and are at that stage in life when kids – and the associated costs – are soon to be a reality, providing that I pay my student loans on time, my credit score should be better than theirs, if I lived in the US, when In reality I’m balance sheet insolvent. It makes little sense to me.
    Please explain it to this poor old Eurotrash.

    • 0 avatar
      corntrollio

      Your credit score is only one element of how you qualify for a loan. See above. Your capacity to pay and the adequacy of the collateral matter quite a bit too.

      People focus on credit score a bit too much, and that’s what actually caused a lot of mortgages to fail. Lenders assumed that a credit score, largely obtained from using credit cards and an occasional auto loan, meant that people would treat a mortgage the same way. That was a bad assumption, and the record shows that to be a bad assumption.

      If you look above (search for “A paper”), a good example of a non-prime/non-subprime loan was Alt-A. Alt-A is called that because it was believed to be an “alternative to A paper.” However, they only evaluated factor #3 and not factors #1 and #2, which were just as important in the underwriting process.

      • 0 avatar
        MeaCulpa

        So basically comparing credit scores is like a dick measuring contest when flaccid (a bit crude I know) it gives you some information but not the whole shebang.

        Here the main thing is balance sheet and cash flow (the latter being more important) unless you have defaulted on a loan. If you’ve defaulted, or applied for several lines of credit (if several companies have performed credit checks lately) you better bring cash or somebody to co-sign.

  • avatar
    MrWhopee

    I think what you need to do is think of Credit Score as a score about how attractive you are to a lender to loan money to. Not a score about how good you are in your financial decisions. The lenders obviously want someone who borrows a lot, yet always paid on time, never late, never default. The higher the interest of those loan is the better. I don’t think they value people who always got their best rate for a loan as much as those who got the highest interest rate, but managed to pay on time with no problem. Yet often times borrowing (especially at high interest rate) is a bad financial decision in the first place (at least in the ‘real’ world, not the topsy turvy world of US financial world, which is dominated by moneyed people trying to make money by lending.)

    • 0 avatar
      bryanska

      Good answer – loans are easier to get with a high credit score because you’re a good customer. You buy money and pay for it, and have a demonstrated history of doing so.

    • 0 avatar
      MeaCulpa

      But really a lender should prefer a customer that only has obligations to him (and the tax man, that guy you simply can’t get away from) and should offer cheaper finance to that guy.

      Maybe this is just confusing to me coming from a system where you’re liable with everything you own for every single debt, unless explicitly stated otherwise, and not just the collateral. If you default on your mortgage the bailiff (debt collection agency actually) will put a lien on your salary, sell your car and take away anything and everything of value.

    • 0 avatar
      corntrollio

      That’s not completely accurate. Obviously, interest rate is completely irrelevant to credit score — doesn’t matter a bit, unless you make a late payment because the interest rate is too high for you to pay on time.

      You also don’t have to borrow a lot of money. Having low utilization of a variety of aged accounts can also get you a higher credit score. Also note that a closed account stays on your report for 7 years, so even well after you pay off a loan, it continues giving you street cred.

      In some ways, income actually does help you have a higher credit score — but indirectly. Some credit card companies base your credit limit on your annual income, so if your income is higher, your credit limit can be higher, and having the same amount charged every month with a higher limit means lower utilization.

      • 0 avatar
        MeaCulpa

        So how do you “optimize” your credit score/FICO(?) without exposing yourself to a boat load of expensive credit? Do you buy stuff on cheap credit that you might as well have bought cash? Use your credit card and pay the balance every month? I’m really curious as this might come in handy some day.

        • 0 avatar
          SoCalMikester

          Yes, and yes.

          If youre going to go to the grocery store or the gas station you might as well just swipe the credit card… Knowing (of course) you will pay the bill in full when due.

        • 0 avatar
          corntrollio

          I use credit cards for every purchase possible and pay in full every month. Doing this I get:
          1) rewards/cash back for doing no extra work
          2) credit history with no late payments or defaults
          3) a nice record of all my purchases

          Some places are cash only, and for very small businesses, I usually use cash to save them the fees.

          The main thing is just paying your normal obligations on time. If you have a student loan, auto loan, or mortgage, pay the damn thing on time. Don’t ever let anything get to collections and learn how to use the FDCPA to your advantage if you do.

          Also, subtle things — ask for bigger limits from your credit card company. If you spend $1000/mo and your card has a $2000 limit, you use 50% of available credit. If you spend $1000/mo, and your card has a $10,000 limit, then you are only using 10% of available credit. The latter is much better for your score. If you have a dormant credit card, use it every few months and pay in full, so your credit card company doesn’t cancel it. The longer you keep it, the longer your average age of an account is.

          It’s not like you need 12 credit cards and 3 big loans. Keep it simple.

          There are places like the Credit Board that are dedicated to this question, so do your research if you’d like to know more. The stuff I’m talking about is really just every day stuff, I don’t do anything out of my way.

  • avatar
    chicagoland

    Mitsubishi slashed the Galant, Eclipse, and Endeavor. So, they fell off the list.

    I’m not surprised to see Focus. Low credt score shoppers go to a Ford dealer hoping to get an SUV. Then, get talked [conned] into a Focus. “That’s all we can put you in”

    They need CAFE credits to sell more trucks to high income buyers.

  • avatar
    mypoint02

    Surprised no one has talked about the auto scoring that takes place now. Not only do you need to worry about your regular FICO, you need to worry about your auto enhanced score. It deals only with how you’ve handled auto financing in the past. Most people don’t even know it exists and you can’t get your score.

    http://ficoforums.myfico.com/t5/Auto-Loans/FICO-Auto-Enhanced-Scores/td-p/228198

  • avatar
    Maymar

    I can think of a not insignificant number of Kia dealers in my area that were previous Pontiac franchises. In so many ways, it was a natural transition, and I suspect the sub-prime buyers aren’t too different.

    • 0 avatar
      28-Cars-Later

      Kia = Pontiac? I’m not seeing it.

      • 0 avatar
        sunridge place

        Its very obvious to me.

        Do you think Pontiac customers are too good for Kia or Kia customers are too good for Pontiac?

        Remove the G8/Solstice (very low volume) from your brain and think Sunfire/Grand Am/Grand Prix/G6 vs Kia today.

        • 0 avatar
          28-Cars-Later

          The Optima certainly looks pretty nice but for the most part when I think Kia I think cheap disposable subprime cars, no amount of faux SUVs, boxy Souls, or clever ads will change that perception. They are the Saturn of this time.

          Sure you could make the argument Kia is restyled Hyundai, as Pontiac was restyled Buick/Chevrolet, and I’ll roll with it, but I don’t see a direct correlation.

          Speaking as a Grand Prix owner for what it is, it blows Kia’s equivalents out of the water and I’ll still take the N-body Grand Am, J-body Sunfire, or even the maligned G6 over a Forte, Optima, and whatever else Kia still sells, but that’s just my opinion.

          • 0 avatar
            bd2

            And that would be just your opinion.

            The Optima (esp. in SX trim) is way superior to the Grand Prix or G6.

            And the Optima in SX-L trim fully loaded goes for around $34-35k.

            And we’re not even talking about the Cadenza or the Quoris which are in whole different level from what Pontiac sold (since the 1980s at least).

          • 0 avatar
            28-Cars-Later

            Ah I concede, this is all opinion, but I would point out Grand Prix and G6 are two completely different models the former being superior in almost every way. If we compare the Grand Prix GT (second trim of three) to the SX (third trim of four) and SX-L (forth trim)

            2013 Optima SX is 26,800 + dest

            Std features:
            2.0 I4 GDI/6 spd auto, EPA 22/34
            274 bhp @ 6000 rpm / 186 tq @ 4200 rpm

            Interior:
            Sport leather/cloth
            8 way power seat lumbar
            Leather wrapped steering wheel/shifter
            Various dash inserts
            CD/MP3 with 6 speakers
            Trip computer
            Push button start
            Bluetooth
            Steering wheel audio controls
            Keyless entry

            Exterior:
            18in alloy wheels
            Sport tuned suspension
            Chrome accents
            HID headlights
            Fog lights
            Heated mirrors
            Chrome tipped dual exhaust

            I bought mine as-is in 2010, the specs for a GT were as follows:

            2007 Grand Prix GT was $24,735 + dest

            3.8L V6 Supercharged/4 spd auto, EPA 17/26 (fuel economy.gov)
            260 hp @ 5400 rpm / 280 tq @ 3600 rpm (Series III 3800)

            Interior:
            Leather
            Heated Seats
            Moonroof
            6 way power drivers seat w/lumbar
            Auto climate control plus passenger side controls
            Trip computer
            Leather wrapped steering wheel/shifter CD/MP3 with 6 speakers
            Steering wheel audio controls
            Keyless entry

            Exterior:
            17 in alloys
            So called “sport suspension” (I see no difference between this and a base)
            Dual exhaust
            Spoiler
            Fog Lights
            Remote start

            Between the Optima SX and the GP GT, I would say they are about the same type of car with options, pricing today would similar due to inflation. The GP offers almost all of the same std features save the HID headlights and heated mirrors while giving you a moonroof, heated seats, spoiler, and remote start in the same package (I cannot find remote start being offered on the Optima, it might be but not std). The GP GT also gives you gobs of usable torque (280 ft-lb vs 186 ft-lb) and similar horsepower (260 vs 274). I take issue with the EPA mileage as I get 19/32 (26.7 mixed avg) at any given time, although I don’t stomp on it much.

            So between the two, they are very similar offerings except one offers almost 100 more ft-lbs and several nice features in the same mid-tier package. To GM haters, the Kia would be the more natural choice and they’ll just pay extra for the heated seats, moonroof, spoiler etc (which are all optional on SX), but objectively its difficult to automatically refute the Grand Prix.

            The SXL offers all of those features standard and more (with the same engine) but runs $34,500. The equivalent Pontiac trim (if there is such a comparison) I suppose would have been GXP which msrp’d at 28,800 with a V8 and a few other features (navi, heads up display etc). In this context the Kia SXL may have won out on additional features for similar money, assuming buyers don’t care about the I4 to V8 comparison.

            I have to say Kia is offering you more than I realized so I’ll give them props. But unless there’s some kind of nice incentive, $26,800 + $800 dest + $1932 tax (pgh 7%) for a total of $29,532 seems like alot (for SX), although this might be a “the industry just sucks” thing vs a Hyundai/Kia thing.

      • 0 avatar
        Maymar

        I’m mostly thinking on how Kia currently sells themselves on some combination of the illusion of sportiness, price, and looks. Granted, unlike Pontiac for years, Kia’s products are legitimately good looking, not just distinctive flared nostril monstrosities.

        As for the first point, I drove an Optima SX recently, and it was admittedly quick, but it didn’t feel like it wanted to be. And the Forte Koup is a pretty solid replacement for the Sunfire GT/Cavalier Z24.

        And, although their stuff is no N-body Grand Am inside, it still feels a little cheaper than a lot of the competition.

        That said, I could see Nissan filling in as the Asian Pontiac as well, although most of their stuff seems to have gotten softer in the past couple years. I might just be swayed by the number of Pontiac dealers that turned Kia when they lost their franchise, which allowed for a number of people to trade their Pontiacs for Kias just by virtue of repeat sales.

  • avatar
    mkirk

    Given how every Kia dealer is yelling and screaming in the commercial I suppose this fits. Also, does Dodge have like a 10 year Mortgage on the Ram or something. I could see some of the folks I know driving these at like 14 percent for 120 months.


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