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Cheap Auto Loans--Is Window of Opportunity Closing?

[Apr 12, 2010.]


Auto Loans: the Good News

U.S. sales of new cars jumped in March, largely on the backs of cheap auto loans, according to a recent New York Times report. Recovering from its recent troubles, Toyota said that its sales were up 41 percent compared with the same month in 2009, while the Ford Motor Company claimed that its sales increased 40 percent. The four brands that General Motors isn't in the process of either closing down or selling together reported that their sales rose by 43 percent.

All three companies were offering zero-percent auto loans.

Auto Loans Returning to Normal Trading?

On April 7, the American Bankers Association reported on many consumer loan delinquencies that occurred during the fourth quarter of 2009, saying that direct auto loan delinquencies fell to 1.94 percent (10 basis points) while auto loans arranged through auto dealers (indirect loans) remained even at 3.15 percent.

This is as important to those borrowing as it is to those lending. Because it is only as lenders see the auto loans market returning to some form of normality that they will feel confident enough to put up the money to make new loans.

Cheap Auto Loans and the Window of Opportunity

The Seattle Times carried a story April 10 that made sober reading if you're thinking of signing up for a cheap auto loan. It may not be all that cheap for very long. According to the article, with ballooning national debt, economic recovery from the recession, and the possibility of renewed inflation, many experts believe a sustained period of interest rate rises is looming. With spending habits shaped by historic declines in the cost of borrowing, many consumers may be in for a shock.

Auto Loans in the Bigger Credit Picture

Of course, there are other areas of borrowing that are expected to become expensive very quickly. In fact, increases are expected across the board. The Mortgage Bankers Association, for example, expects the rate for a 30-year, fixed-rate mortgage to average six percent in the first quarter of 2011 and 6.6 percent by the end of 2012.

Meanwhile, the Federal Reserve's latest figures show that credit card rates are already on the rise. They averaged 14.26 percent in February, compared with 12.97 percent in the first quarter of last year. And that Seattle Times piece quoted one expert who said he expected them to average 16 or 17 percent by the fall.

All of which means that, if you want affordable borrowing, you need to act quickly. Look online for competitive auto loan quotes.


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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