Car Ownership Is Getting Tougher

Pricier Cars & Maintenance

The used car market put the pedal to the metal during the pandemic. The average price of a used car jumped 36% to $28,000 over the past three years.

This dramatic spike in price led many Americans to take out hefty loans to afford vehicles. But a higher price doesn’t always translate to higher quality.

Many of these used cars are starting to break down, putting drivers behind on their loans.

Tightening Loan Standards

With more drivers defaulting on their auto loan payments, dealerships are starting to tighten their lending standards. For example, some dealers might only finance cars that are under 10 years old, have under 120,000 miles, or meet other similar requirements.

This means that used cars are both becoming more expensive and harder to finance. The combination of these factors is making it harder for many Americans to find a car they can afford.

Buying Strategically

One strategy you can use while trying to find your next ride is pre-approval. Getting pre-approved for an auto loan from a bank, credit union, or online lender before arriving at a dealership has three potential benefits:

1.    Establishes a budget. Pre-approval helps to set your budget in stone, before talking with a salesperson who may try to convince you to stretch that budget.

2.    Getting ahead of your credit. Applying for pre-approval will help reveal any unforeseen credit-related pitfalls, avoiding any unpleasant surprises at the dealership.

3.    Optimizing your rate. Seeking pre-approval encourages you to shop around with different lenders to find the best interest rate possible. Auto dealers rarely offer the lowest rates, so this alone can potentially save you thousands in interest over the course of the loan.

With cars getting pricier to both buy and maintain, getting pre-approval from a third-party lender can be key to recouping increased costs.

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