The Average American FICO Hits All-Time High (692)

As the recovery from the recession of 2008-2012 continues, the good news for the creditworthiness of the average American continues to improve. The latest proof of Americans individual recovery is that the average FICO score hit 692 in April, 2014.

That is a one point gain over April, 2013 and a six point jump over the recent all-time low of 686 set in April, 2009. FICO has only been tracking the average credit score since 2005, so it is possible that it was higher prior to that. To place the 692 score in perspective, it sits on the high end of ”Average”. FICO offers scores that range from 300 to 850. A person must have a score between 700 and 749 to have a credit rating of ”Good” and a score of at least 750 to achieve a rating of ”Excellent”.

Result of Increased Financial Responsibility?

Anthony Sprauve, senior consumer credit specialist at FICO, believes that the higher average score is tied to an improved sense of financial responsibility since the recession ended. He went on to say,

”After the recession, consumers have become better stewards of their financial house; they’re paying more attention to their finances. They’re more educated and more aware, and I also think there are fewer confusing financial products in the marketplace.”

One possible factor in the improving credit scores could be that Americans have become more cautious with the amount of debt that they are taking on. Since credit utilization is a major aspect of credit scores, accounting for thirty percent of a credit score, it is easy to see how a lower debt load could be leading the upward tick in scores.

Tighter Controls on Credit

Another possible factor contributing to the higher score could be the tighter controls on credit. The leading factor behind the recession and lower credit scores was sub-prime lending. Many creditors were offering mortgages to borrowers who had questionable credit histories. In addition, many of these borrowers had payments that drove their budgets over the brink, causing a huge wave of defaults on all types of credit. The tightening of lending guidelines has eliminated some of the risky loans. This has led to fewer defaults and less frequent negative reporting to credit agencies.

Lenders are not the only one’s contributing to the financial stewardship being seen post-recession. Sprauve puts it succinctly:

”There was so much press about people mismanaging their credit, not paying close enough attention, not being active stewards of their financial ship. That was a wakeup call for a lot of Americans to change that behavior, to not trust lenders to do the right thing for them, that they need to do the right things for themselves, that they have to take ownership.”

We have long believed that Americans could achieve better credit ratings through education and awareness. This news seems to prove that theory in spades.

Is it Better to Sell a Car Privately or Trade it in?

It would be nice if we could give you a straightforward answer, but there are several factors that you will want to consider in order to make the best decision for your circumstances. We will list a few of those factors along with a tip or two to help you get the best price possible.

What To Do First

No matter what you do in life you want to arm yourself with knowledge. In this case, you want to know what a good price for your car is: both to a private buyer and as a trade-in. There are two major resources to search out. The first is probably the premier name in car values: Kelley Blue Book. Their website, www.kbb.com, is easy to use and you will be quickly prompted through the process. Another well known resource for used car values is www.nadaguides.com. This site is also easy to navigate; however, the values given differ somewhat from those on Kelley. If you average the two values, you will have a good starting point for price negotiations.

Making The Deal

Alright, you have a price in mind, now you have to make sure you get it or close to it. You will want to start by setting an asking price that is at least 10 percent higher than you want. For example, if you want $5,000, you will want to ask at least $5,500. The goal of setting a buffer amount of 10 percent or more is to allow for negotiations that will satisfy both parties.

Which will you pay more for: a dirty car that you can imagine in better shape or a car that is shining in the sun and has a super clean interior? You will want to detail the car to the best of your ability before putting a for sale sign in it.

Lastly, look the car over carefully. Do you see any puddles from leaks, large dents, fading paint, bald tires, worn hoses, etc. If you see them, a potential buyer may and a person appraising a car for trade-in definitely will. All of these items will be used to get you to lower your price. Prepare yourself by rehearsing an answer and steeling yourself to stick to your price, or budge grudgingly.

What Next

With a value in your hand, it is time to exam yourself. Are you willing to be tied down for awhile? Can you tolerate the “lookie-lou’s” who will inundate you before a buyer comes along? Do you feel comfortable having strangers visit your home to exam the car? If you still owe money on the car, do you know how to clear the title so the new owner can take possession? If so, then you are good-to-go to sell the car yourself. If not, then it might be time to head to the dealership to trade the vehicle in.

Well, after these few tips, the answer to the original question ”is it better to sell a car privately or trade it in” is still up in the air. In general, you will get a better price by selling a car privately, especially the older a car is. You need to be prepared for the fact that you could be inundated with people who are just ”looking,” making the whole process tedious and frustrating.

Tesla and the Fight for Direct Auto Sales

Tesla Model S
Image: Wikipedia

The Tesla S is the electric vehicle that threatens to topple the old EV paradigm, the notion that an electric vehicle has to be ugly, slow, and only appeal to the green fringe of society.  In fact, arguably it’s already accomplished that toppling.  It is now the most popular car in many of the wealthiest neighborhoods in the nation, showing that people with the necessary means will indeed spend money on and drive electric vehicles, and it is, almost unarguably, one sweet and handsome ride. Also, let’s not forget it’s performance:

Tesla S Model Battery 0-60 MPH Top Speed EPA Combined MPG
Base 60 kWh 5.9 seconds 120 MPH 95 MPGe
Signature 85 kWh 5.4 seconds 125 MPH 89 MPGe
Performance 85 kWh 4.2 seconds 130 MPH 89 MPGe

Quite the results from an electric car. No wonder it won the 2013 Car of the Year Award from both Motor Trend and Automobile Magazine, and was given the highest score by Consumer Reports…ever!

But given the man behind the company, these results might not be so surprising.  Elon Musk, known as one of the most “disruptive” entrepreneurs of the last decade, co-founder of PayPal and mover-shaker in both aerospace and solar power as well. Perhaps not as headline-worthy, but just as industry-shaking, is the Tesla’s–and Musk’s–push for direct auto sales, circumventing traditional dealerships to sell consumers cars through their own Tesla showrooms.

Dealer Pushback

To even this industry observer, let alone the run-of-the-mill consumer, it would seem logical, fair, and unsurprising that Teslas would be sold at Tesla dealerships.  However, automobile dealer associations across the nation are lobbying hard against the practice, claiming that direct auto sales are in direct violation of franchise rules, sidestepping dealers entirely. So far, the following states have attempted to restrict and/or ban Tesla direct sales:

  • New York
  • Minnesota
  • Georgia
  • Texas
  • Virginia
  • Arizona
  • Ohio
  • Missouri

…and the list keeps growing.  Some states, like Texas, have been successful in this endeavor. In the Lone Star state, Tesla can have galleries (like showrooms), but not only is the company prohibited from selling cars through these facilities, company employees aren’t even allowed to tell prospective buyers how they might purchase one.

Dealer Logic

It shouldn’t be surprising that dealers are pushing back against Tesla’s direct sales. Though Tesla itself may not be that great a threat, the precedent set by the company could open the floodgates for retailers of all kinds, particularly Chinese carmakers. What’s more, franchise laws are important for protecting the financial investment of dealers who have so much capital tied up in vehicle inventory and property. Dealer advocates have also stressed than independent dealer networks enable consumers to compare cars, and serve as pro-consumer intermediaries between their customers and the manufacturers. These arguments, while not necessarily invalid by any means, do seem to lack a certain amount of moral weight or force.

Consumer Logic

Most consumers we’ve spoken with on the subject are actually confused as to why Tesla would not be allowed to sell their cars directly to consumers. This is especially true of consumers who have felt taken advantage of in the auto-buying process in the past, and wonder why they should have to pay a middleman for a product the manufacturer would like to sell directly.

Which Used Cars Are The Most Reliable?

The Most Reliable Cars
The Acura TL – Consistently Reliable

The biggest fear that any used car buyer has is that the vehicle they pick out will not be reliable. It is a valid fear, the more so the older the vehicle is. Luckily, in this age of instant information there are people who’s sole focus is to track vehicle reliability data. So, with a stack of data in hand, we are offering you a list of the most reliable used cars on the market in 2014.

Acura TL

The Acura TL has been a consistently reliable car since its introduction, with many examples being used as daily drivers well after 150,000 miles. In order to have the best chance of combining long-term reliability and low mileage, you should look for a 2008-2009 model. The TL does carry a high price tag in many instances, so be prepared.

Ford Fusion

Production of the Ford Fusion began with the 2006 model year. The Fusion has performed well in every known metric: reliability, value, total cost of ownership, and safety. One caveat, if possible you should opt for the 6-cylinder engine. The more common four feels a bit, well, inadequate.

Honda Civic/Accord/CR-V

All three of these Honda offerings make an appearance for good reason. Each offers solid fuel economy and great long-term reliability. Each has been lauded by the professional critics and past owners. In fact, it is nearly impossible to read anyone’s top ten list of cars without seeing at least two of these models. You probably drive past at least two dozen of these vehicles each day that have in excess of 200,000 miles on them. With a little bit of prudent shopping, you can find a daily driver for many years to come.

Mazda Miata

Most Mazda offerings are fraught with despair. Owners are continually upset over poor transmissions and a lack of power. The Miata is the sole beacon of hope for the entire Mazda line-up. The very able standard 2.0L engine offers 170 hp and 140 lbf·ft of torque. The styling is fresh enough to avoid the dated look that Mazda is infamous for. Since the Miata is generally a second car, most are low mileage specimens.

Toyota Prius

Just offering the best fuel economy in the industry would be enough to keep people interested in the Prius, but it also offers reliability. As with many top fuel economy hybrids, the Prius does not offer the acceleration that many Americans take for granted, but the 110 hp engine will eventually reach highway speeds. A major drawback to many hybrid cars is the cost of replacing the battery for the electric engine. This repair can run into a few thousand dollars and buying a used one means that repair is closer at hand. If you are in the market for a car that is only about 1-2 years old, the Prius C was recently ranked by multiple publications as the most reliable vehicle available and offers 53 mpg/city and 46 mpg/highway. Remember, a hybrid uses its electric engine if traveling under 30 mph, that is why city numbers are higher than highway figures.

Buying a Car with a Credit Card–Smart or Dumb?

When you want to buy a car, you probably won’t have enough money to immediately pay the full balance. There are several ways that you can pay for it, and using a credit card is a method you’ve probably considered. Although there are several pros and cons in paying with a credit card, responsibility is important. It’s a great method of payment if you can be responsible with your monthly payments.

Upsides:  Low Introductory APR, Credit-Building

If you’re going to pay it with a credit card, you want to do it in a smart way. You want a card that has lower rates for the first six months, or even the first year. 0% APR is the best option. It means that for the first six months, or the first year (whichever deal comes with your credit card), you will not have to pay interest for that amount of time. This gives you a head start to pay as much money as possible to make a huge dent in the amount you owe before the bank starts collecting interest. Paying with a credit card is also a great way to build credit. If you make all your payments on time and pay it off in a timely fashion, this shows the credit bureau that you are responsible.

Downsides:  High APR in Future, Credit Risks

There are some obvious downfalls with using this method. If you miss a payment or don’t pay enough of it over a certain amount of time, your credit rating will drop and the interest will cause you to pay more than you actually spent. Letting interest accumulate can be dangerous for your credit score and dig you into a deeper hole debt-wise. This method is only suggested for those who are responsible with their credit card. To be more responsible with making payments, you should come up with a budget and stick to it, no matter what. It’s also important to pay more than the minimum payment each month because you will end up paying off the balance faster.

Many people end up doing this because auto loans are often secured. This means that if you don’t make your payments, they can take back your vehicle (or something of equivalent value). This is obviously not the same case for a credit card. With a credit card, the only thing you have to worry about is interest–and the possibility of having a low credit score if you aren’t responsible with your payments. That said, these are real and serious risks, and you should proceed with consummate caution if you decide to pay for a car in this fashion.