Bad Credit Car Loans Helped Boost Sales In 2014

If credit cards are ubiquitous, then credit card holders with bad credit too, are a growing segment. 18% interest is intimidating, even for extremely money conscious, disciplined credit card holders. It is therefore natural that occasionally one develops bad credit.

On a different, but connected note, the interim budget announced drastic cut in excise duties on passenger cars and SUVs. As a direct result, the prices of many models of Volkswagen, Hyundai Motors and Nissan have dropped. The price reduction is anywhere between Rs. 10,000 to 1.35 lakh. In the high end segment, the prices have gone down by as much as 7 lakhs. And yet, when compared to last year, cars sales in the first couple of months of 2014 were down by over 7%. But then suddenly, the figures began to rise. The reason; bad-credit, car loans.

During the recession, the loan requirements in the auto industry were very high. A huge population, comprising of willing buyers, were completely shut out, owing to bad credit. The average credit score at the time was over 775. But this scenario changed drastically underwent a visible shift.

Lenders grew more lax with the acceptable credit score, going as low as 600 points in some case. They also reduced the monthly EMIs and spread out the loan to a longer period. These two actions combined resulted in a visible growth in auto sales. A huge section of public got interested in buying a car gained access to the financing of their choice, despite bad credit. This not only encouraged them to buy cars, but also to take bigger loans, resulting in further sales.

This trend has also had a positive impact on the psyche of the public. The so called defaulters also paid back the lenders as promised, thanks to the lower interest rates and EMIs, resulting in more bad-credit card holders to opt for car loans and buy cars. Those with poor credit are now saving up and re-planning their finances to make room for their auto purchase, willing to work at a more seamless, financially responsible payment schedule.

The internet too is ripe with multiple options for individuals with bad credit to avail car loans. ‘Bad credit? No problem!’ This continues to be the digital mantra that has induced higher auto sales, and a surprisingly large (and growing) number of interested car buyers. Specifically in the passenger car and SUV sector, the possibility of getting a loan despite bad credit has helped push up sales visibly. An emergent customer base is that of first time car owners, in the age group of 25-28, who are eager to buy their first car, thanks to the possibility of an auto loan, despite bad credit.

Coupled with further discounts planned before the end of the year, the auto industry can look forward to a good year of bad-credit, loan based car sales.