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Cheap auto loans still available -- but for how long?

[Oct 10, 2010.]

 

Cheap auto loans still plentiful


For many months, it's been a pleasure writing this blog, mainly because it's always enjoyable to be a bringer of good news. And that's been more than plentiful when it comes to auto loans.


However, this week it may be prudent to sound a warning note. But don't panic. There's still no shortage either of positive statistics or of great financing deals. However, there are a few clouds on the horizon that may -- just possibly -- suggest an approaching storm.


Auto loans still getting cheaper and more available


Let's start with the positive news. On October 7, the Federal Reserve published the consumer credit figures for August 2010. And, at least for auto loans, they were good.


Non-revolving credit, which is mostly comprised of auto loans, crept up by $1.6 billion compared to July rise to $1.592 trillion, the highest sum since the second quarter of 2009, and only $11.6 billion lower than its all-time high in 2008. So there's plenty of money being lent to consumer vehicle buyers.


Better yet, the Fed said interest rates for loans from auto finance companies had inched down again. They were still a little higher than they were in 2009, but they were way cheaper than they were throughout 2005-2008.


And, a few days before the Fed's figures were published, the American Bankers Association (ABA) had some encouraging data of its own. BusinessWeek reported the story: "Repayment of bank card, home equity loans and auto loans all improved in the second quarter." And it went on to explain that delinquency rates in all these areas had very slightly improved.


Distant clouds?


This was a bit confusing, because less that two weeks before the BusinessWeek story appeared, The Wall Street Journal reported pretty much the opposite. Fitch Ratings, the Journal said, had concluded that: "Delinquencies among prime-rated U.S. auto loans edged higher in August from July, the fourth-straight months of increases..."


Now, it's perfectly possible that the ABA and Fitch are both right. The former was talking about all auto loans, while the latter's data concerned only prime-rated ones. Still, you might think that there's a contradiction here somewhere, especially as most people would expect prime loans generally to do better than sub-prime ones.


Nearer clouds?


Perhaps the worst news was the Labor Department's unemployment figures for September, published October 8. These, as you already know, showed a loss of 95,000 non-farm jobs that month, a number that was considerably worse than most analysts expected.


Few economists are talking up a double-dip recession yet, and the IMF recently called the prospect "unlikely." But it's not being ruled out either. And, if there were to be one, it would likely bring to an end the current generous supply of cheap auto loans.


Of course, it's way too early to be seriously worrying about the economy tanking again. But if you're a cautious type of person, you might want to check out quotes for auto loans here--right now.

 

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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