Cheap Auto Loans Help Boost Car Sales

[Feb 14, 2010.]

 

Cheap Auto Loans Are Here Again

When Dana Johnson, the chief economist at Comerica Bank, released research on auto affordability last week, he noted a "decline in financing rates." And the bank, headquartered in Dallas, TX, reckoned that those rates fell a full 19 basis points during the last quarter of 2009.

Meanwhile, the Federal Reserve concurs that auto loans are now cheaper. Its statistical release concerning consumer credit in December 2009, published on February 5, shows that the average rate for new car loans from auto finance companies are at their lowest since at least 2005, the earliest period covered by the report.

Small wonder, then, that the dollar value of those loans in the last quarter of 2009 was 27.5 percent higher than during the same period in 2008. We all love great auto loan deals!

Auto Loans and the Economy

Secretary Charles Erwin Wilson famously told a U.S. Senate committee, back in the 1950s that "What's good for General Motors is good for the country." When he died, Time magazine corrected that misquotation, by printing what he actually said, "For years I thought that what was good for our country was good for General Motors, and vice versa.""

But, whatever Mr. Wilson's precise words were, there has traditionally been a close relationship between the fortunes of Detroit's big car makers and the health of the U.S. economy. This makes a report from BusinessWeek earlier this month very welcome for all of us. It said:

Non-revolving debt, including auto loans and mobile-home loans, rose by $6.8 billion as car sales increased during the month [December 2009]... Auto sales in the U.S. increased in December to a seasonally adjusted annual rate of 11.23 million, the strongest since 14.09 million in August, when Americans took advantage of government incentives. [Mostly "Cash-for-Clunkers."]

Car Sales Complicated

Admittedly, the BusinessWeek piece continues "The pace slowed last month, to 10.8 million." But, at the beginning of this month, the Wall Street Journal took up the story:

General Motors Co. and Ford had each said they expect to post double-digit sales gains for last month [January]. Both companies, along with several other auto makers, raced to take advantage of Toyota's stumble with incentives and low-financing offers aimed at winning over Toyota owners.

For the overall industry, GM had predicted the U.S. selling rate to be in the 10.7 to 11 million range; Ford expected a selling rate in the mid-10 million range. That compares with a selling rate of 9.6 million vehicles in January 2009.

Cheap Auto Loans Help Recovery

However you want to analyze these figures, it's hard to see them as anything other than great news both for individual car buyers and the American people as a whole. And, if you fall into both categories, you should be celebrating.

If you're tempted to upgrade your car, or to buy your first car, check out some seriously cheap auto loans. And if you're in the market for "no credit check loans," we may well be able to help with those, too.

 

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.