The recession is in full retreat, but don’t tell that to auto lenders. Lenders across the country are using low interest rates and special financing options to lure buyers into the door, offering the lowest interest rates in a generation. According to Experian automotive the average interest rate paid by car buyers is at an all-time low 4.27 percent, the lowest rate since 2008 and the height of the financial collapse.
Taking Advantage of Low Rates
Unlike in previous years, it hasn’t been the subprime market that has pushed the rest of the auto lending industry. In fact, the average borrower’s credit score is approximately the same now as it was before 2008, so people are clearly repairing their credit and taking advantage of low interest rates while they’re still available.
If you want to take advantage of a low interest rate, make sure you get your credit score in order. Ensure that your credit cards are paid off and your other debt payments are made consistently and on time. A good credit score will help banks trust you with larger loans, and it will also ensure that you get the advertised low interest rate rather than a higher rate reserved for more risky borrowers.
A Little Good News, a Little Bad News
Of course, the news isn’t all good for auto buyers, or for the economy overall. While interest rates are at their lowest point in a decade, the average amount borrowed per lender has risen sharply. In fact, the average borrower now carries nearly the same level of debt that was common in 2008… possibly pointing to another pending credit collapse in the auto industry instead of home loans. In addition, the average length of loans is going up slightly, so more buyers are stringing their loans across more than the recommended three years, and they are paying more interest as a result.
Future of the Auto Loan Market
Complete Auto Loans is confident that the auto loan market is heading for stability, and for a gradual increase in interest rates as demand for new automobiles picks up. Like any industry, the auto loan industry responds to the swings in the market, but it takes longer for massive financial institutions to respond to the changes.
Complete Auto Loans advises potential car buyers to take the time to shop around for the best interest rate available. Now that you know the average interest rate being paid by borrowers with good credit, look at both in-person lenders and online lenders to find a loan package that meets your needs. Also keep in mind that, even though interest rates are low, it is still best to pay off the principle of your auto loan as soon as possible to avoid interest payments.