Getting An Auto Loan In The Current Economic Crisis
It seems as if each new day brings more bad news on the economic front. As you know, the financial crisis has tightened credit markets. To auto dealerships, that means lower sales. To consumers, it means that it can be difficult to get a car loan. But, it’s important to realize that the credit markets are not completely closed. You can borrow money to purchase a new vehicle. In this article, I’ll describe the current state of the auto industry in the context of how hard it is to get an attractive car loan.
Understanding Automakers’ Willingness
It may be hard to tell from watching the news, but automakers are eager – even desperate – to find prospective buyers for their vehicles; and they’re willing to offer financing terms for buyers with a reasonable credit score. In fact, because dealerships are in financial dire straits, a lot of them have begun offering attractive incentives in order to move their inventories. If your credit is good, now may be the most opportune time in years to purchase a new model.
Current Financing Rates
As you would expect, interest rates on auto loans are heavily dependent upon your credit score. Rates always change, so the numbers I’m providing are likely to move up and down. That said, I’ve been noticing that financing rates plummeting over the last few months.
If you’re in the top bracket with a credit score above 720, you should be able to find bank-supported auto financing at less than 6.7% If you’re at a credit union, you might be able to secure a rate below 6%. Once your score dips below 670, rates start moving up significantly. For example, a car loan with a 60-month term at your bank might be set at 11% (credit union financing might be set at 9%).
The Trend Against Leasing
In the past, millions of people considered leasing a vehicle rather than purchasing one. You could count on getting more for your dollar through a lease. However, the current economic climate has had an unanticipated effect on the auto leasing market: it has become much tighter. Most of the automakers have begun to restrict the number of cars they make available for leasing. Those people who have become accustomed to driving vehicles they couldn’t afford to buy have little choice but to downsize their expectations to fit their budget.
The important point is that it is still possible to secure financing for a new vehicle. Despite the prolonged lull in consumer confidence and the recent challenges in the credit market, you can get a car loan. The key is making sure that you’re creditworthy and then approaching the dealer or your bank. For a lot of consumers, the current financial crisis may be the perfect time to get an attractive deal on a new car.
