Cheap Auto Loans More Widely Available

[Jan 18, 2010.]

 

Auto Loans Easier to Find

When Susan Tompor came to research a feature she was writing about auto loans for the Detroit Free Press recently, she uncovered a whole truck load of positive news. She spoke to a number of analysts and financial executives, and their verdict was unanimous: there's a definite improvement in lenders' willingness to provide the credit that people need to buy a car or truck.

According to one analyst, up to 40 percent of people who had virtually perfect FICO credit scores (of 750 and above) were turned down when they applied for auto loans last year. Now, those in that fortunate group are being approved about 90 percent of the time.

And people who have slightly less pristine credit reports--but who are not in the sub-prime category--are today being approved in at least 75 percent of cases. It's harder for really risky borrowers, although about one in 20 of those are successful in finding car financing.

Cheap Loans

Ms. Tompor says that "car loan rates are at record lows." And recent data from the Federal Reserve suggest she's probably right.

The Fed's figures show that the average rate from a commercial bank for a 48-month auto loan for a new vehicle was lower in November 2009 (the latest month analyzed) than at any time since 2004, which was as far back as the report went. So, if your credit score is anything above sub-prime, then you stand an excellent chance of finding yourself one of the all-time cheap loans of your life.

To stand the best chance of being approved, be on your best behavior over bill payment, and don't take out other loans or credit cards for some months before you apply. Also, check your credit report before you fill in an application so that you can gauge the likelihood of success before you commit yourself.

Why the Easing?

Of course, the economy is still sluggish, and lenders will continue hurting until unemployment rates fall substantially. But people who offer credit for a living can't make money if they're not lending, so they're now keen to find good risks. And their mood is made better by declining delinquency rates.

Earlier this month, the American Bankers Association published its latest Consumer Loan Delinquency Bulletin. And the report's findings made cheerful reading. Direct auto loan delinquencies (those arranged through a bank) fell from 2.46 percent in the second quarter of 2009 to 2.04 percent in the third quarter. And the same figures were 3.26 percent and 3.15 percent for indirect loans, which were arranged through a third party, such as a dealership.

Your Next Step

If you want to buy a new or used car or truck, you need to find a great finance deal. Get a free quote and a fast loan decision here.

 

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.