Buyer Beware - Bad Auto Loan Deals Are Increasing

Damien Frost - 2020-11-17T22:00:00.000Z

Consumer complaints related to auto loans for both new and used cars have increased exponentially during the COVID-19 pandemic. According to a recent report by the California Public Interest Research Group (CALPIRG), the number of customer reports between March and July of this year is more than any other five-month period in the Consumer Financial Protection Bureau's eight-year history.

From being denied loan payment relief to unethical collection attempts, consumers submitted more than 2,800 complaints related to auto lending products and leases during this five-month period. From deceptive add-ons to incorrect credit reporting, the CFPB database reveals an array of abusive practices and scams practiced by dealerships that deal with bad credit, captive finance companies, and even banks.

The pandemic has already put employment and the economy to a standstill. To add to these problems, the CARES Act passed by Congress in March 2020 didn’t include auto loan debt relief. As a result of this, a lot of consumers weren’t able to make their monthly payments. This led to collection attempts and a spike in customer complaints regarding harassing behavior by collection agencies.

What Are the Complaints Regarding?

The CFPB's Consumer Complaint Database reveals a wide variety of abusive practices involving auto lending products and leases, which can damage a borrower’s credit report. Based on the dealership complaints raised by consumers, here are five major issues during the period of March to July 2020:

Unnecessary add-ons: Complaints regarding dealerships trying to sell expensive add-ons such as insurance, accessories, and extended warranties
Changing terms: There have been over 280 reports about dealerships changing loan terms during or after closing. For instance, forcing customers to accept a higher rate than what was initially quoted. A few complaints are also about ‘yo-yo financing,’ wherein a dealership tries to change the lending terms after the customer has driven off the car
Confusing billing: One in five auto lending product complaints include the term ‘billing problem.’ Moreover, almost 42% of the reports talk about broken billing systems that cause late fees
Deceptive sales techniques: Many grievances also describe that customers felt high-pressure when looking for loans, add-ons, insurance, and other products. Some complaints also referred to dealerships using shady techniques or not providing complete information about fees
Unethical debt collection practices: The majority of consumer complaints are regarding debt collection practices for pending repayments. Almost 45% of these grievances describe harassing behavior by debt collection agencies

Use A Recommended Car Loan Provider

With the rise in troubles related to abusive practices by banks and dealerships, it’s in your best interest to choose a financing provider that’s well-known and has many positive customer reviews. This becomes even more important when you’re struggling with a poor credit score and are looking for bad credit car loan dealerships.

By choosing a reputed financial organization, you’ll be able to easily avoid common auto loan problems. That said, here are our picks for the best auto lenders.

myAutoloan

With myAutoloan, you can compare multiple lenders and offers at the same place. This platform matches borrowers to a variety of auto lending products based on their credit scores and DTI-ratios. It takes just a few minutes to match you with four of the best available lenders meeting your requirements. The entire process is so quick that you can sign an agreement and receive the check within 24 hours.

You can borrow a minimum of $8,000, and repayment terms are usually around 84 months. One of the best things about myAutoloan is that it accepts applicants with a FICO score as low as 500. In addition to these, the platform doesn’t charge you an origination fee or prepayment fee.

LendingTree

LendingTree is an online marketplace that connects borrowers to lenders according to personalized needs. The platform offers a lot of features, most of which aren’t available elsewhere. You can use the platform to apply for new and used car lending products, refinancing, and lease buyouts.

The platform accepts all credit types; however, final approval depends on the individual lender. Loan terms and interest rates also vary significantly depending on the lender you’re matched with. There are no minimum income requirements, and lending amounts range between $5,000 to $35,000 with repayment terms between one and seven years.

Carvana

Carvana car financing is another one-stop-shop that allows you to get estimated financing terms based on a prequalification application without impacting your credit score. The platform accepts all types of credit scores. However, it has strict requirements for age and income. The maximum repayment term offered by lenders on this platform is 72 months.

If you’re looking for affordable auto financing, Carvana’s prices are well below average rates, even for used vehicles. The company has partnered with Experian AutoCheck to guarantee a complete and transparent history of your car. Moreover, if the vehicle doesn’t meet your expectations, you can return it within a week at no cost.

Financing A Car With Bad Credit

If you’re struggling with poor credit, you might have to settle with subprime lenders offering bad credit auto loans. Keep in mind that these lenders will charge a higher interest rate, and you may have to opt for stricter repayment terms.

Here are some ways to increase your chances of getting an affordable auto lending product when you’re struggling with finances:

Bring in a cosigner with a good credit score to increase your chances of getting better rates and flexible terms
Choose a different vehicle. If you opt for a different model or go for a used car instead of a new one, there’s a higher chance of getting a better deal
Try putting in a large down payment. This will reduce the loan amount; thus, lowering the lender’s risk and increasing your chances of getting approved for financing
Compare multiple lenders (banks, credit unions, and dealerships) to figure out who offers the lowest rates and the best terms. If possible, try getting prequalified so you can be in a better negotiating position
Avoid add-ons. If you’re trying to finance a vehicle with bad credit, it’s in your best interest to sacrifice a few features, which in turn will lower the total amount of debt