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Cheap auto loans continue to accelerate

[Apr 18, 2011.]

 

When the Federal Reserve published its consumer credit data for February, the numbers contained few surprises for car makers, dealers or those who provide auto loans. "Nonrevolving" borrowing (mainly auto loans, but also fixed-term credit for mobile homes, education, boats, trailers and vacations) jumped by more than $10 billion in February. January's increase, which was at the time regarded as unusually large, was only $8.3 billion.


At $1.625 trillion, the amount owed by Americans in non-revolving credit agreements is now higher than it was at the peak of the prerecession boom. In 2006 it stood at $1.514 trillion, in 2007 at $1.580 trillion, and in 2008 it reached $1.604 trillion.


In reporting the Fed's figures, The Wall Street Journal highlighted the impact on Detroit by focusing on these two facts:




    1. Auto sales rose strongly in January and in February, government data on U.S. retail sales show, an encouraging sign given the sharp rise in gasoline prices.

    2. General Motors Corp. ended 2010 with its best profit in more than a decade. The car maker sees further growth this year. It had filed for bankruptcy protection in 2009.



Auto loans' rates near historic lows


Back in January, this blog reported a study from edmunds.com that said that in December 2010 auto loans were at their cheapest. The Fed's data suggest that may still be the case. It shows that 48-month auto loans from commercial banks for new cars averaged 5.87 percent in the last quarter of 2010, but were down to 5.86 percent in February 2011.


Of course, those rates are averages for a particular type of new car loan, and many who signed up for these are likely to have pristine credit reports. Most of us have to pay significantly more.


However, all rates are currently low (except, perhaps, those for some credit cards) and it's probable that you could be paying less than previously for your auto loan, regardless of your credit score.


Auto loans more available for subprime borrowers


If you fall into the subprime category, you stand a much better chance of being approved for an new car loan this month than you did a year ago, according to a new study by CNW Research. The company says that those with 700+ credit scores were approved for car loans 13.55 percent more frequently in April 2011 than in April 2010. Those with scores between 670 and 700 were successful 17.81 percent more often. But the truly stunning figure is for those with scores below 670. Their applications were approved an amazing 92.59 percent more frequently.


So if you've been putting off applying for a car loan because you've been worried about your application being rejected, now could be the time to act. Why not get quotes for cheap auto loans today?

 

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.

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