Auto Loans: Hard to Get?

[Jun 10, 2009.]

 

In spite of auto dealers offering great deals on new cars, Fortune Magazine report that difficulties getting approved for auto loans is causing headaches for potential car buyers who need a loan. With US automakers struggling to regain customer confidence, why should there be a problem with in-house auto loans?

GMAC Accepting Lower Credit Scores for Auto Loans

GMAC has loosened its credit requirements to approve auto loans for borrowers with credit scores as low as 620, but business is not being done as usual. In the first quarter of 2009, GMAC wrote about $3.4 billion in auto loans as compared to $13.1 billion during the first quarter of 2008. A combination of influences, including consumers taking a "wait and see" attitude toward purchasing big ticket items, concern about bankruptcy filings by US automakers, and tightening credit markets has caused auto sales to decline.

 Consumers wanting to buy a car should prepare for getting an auto loan by following these tips:

• Check credit scores: Go to the annual credit report website, where you can order credit reports from the three major credit bureaus at no charge once a year. Credit scores can also be purchased at a modest price.


• Review credit reports carefully: Errors and incorrect data can reduce credit scores. Review and verify all information contained on each credit report. Correct errors by following the instructions here.


• Set spending limits: Buying a car can be great fun until the first loan payment is due. It's important to establish limits for auto prices and loan payments before shopping for a new car.


• Compare auto loans: Check with multiple lenders to find the best loan rates. Understanding all terms and conditions of financing can save trouble and avoid misunderstandings later.


• Be proactive: When visiting dealerships or lenders, be clear about purchase price range and payment limits. Knowing credit scores may be helpful for negotiating.

Taking time to shop for auto loans and a new car can help in locating the best possible terms on financing. While the auto industry and auto finance providers are figuring out how to best serve the car buying public, researching buying and financing options before visiting dealerships may result in a getting a great deal on a vehicle and the loan to pay for it.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.