For the past few years, many lenders were tightening the gates for credit applications. In the world of auto finance, many people were seeing interest rates slightly higher than they expected. In some cases, traditional lenders were restricting credit requirements to such degrees that some people could not gain financing. Secondary financing options became increasingly popular as individuals with sub-prime credit conditions sought loans. In what many financial experts are calling the recovery, however, auto finance options are beginning to blossom.
Riding the Interest Wave
During 2008, the average instant rate for someone with excellent credit who was buying a new car on 60-month terms was around 6.5 percent. Some people were able to obtain lower rates and others did take advantage of occasional temporary zero percent offers. However, some people saw even higher rates and subprime borrowers struggled to win approval for auto finance loans. In late 2011, however, the average rate for an excellent buyer dropped to a bit under 4 percent.
Bank Verses Credit Union
Regardless of your credit history, if you are looking to finance a vehicle purchase in the current environment, you may want to consider a credit union loan. In 2011, the average interest rates across all types of loans and for all types of buyers was about a percentage point lower at credit unions than banks.
Shopping Interest Rates
Not all financial institutions have reacted to the recovering economy in the same way. Many lenders have kept restrictive requirements, making it harder to get auto finance approval from them than with competitors. This is why it is important to shop around for the best interest rate. At the same time, you do not want to put in multiple applications during a short time period. Half a dozen or more pings on your credit report will lower your FICO score, making it less likely you will get the rate you are looking for.
If you want to shop for interest rates and auto finance options without completing credit applications with multiple lenders, you can consider the solution offered by MyAutoLoan.com. With MyAutoLoan.com, you complete a single application that is reviewed by multiple lenders. Lenders who are willing to offer you an auto finance solution send a proposal through the website. You can review the offers and decide which one is right for you. This means you can see interest rates from multiple lenders easily and without spending a great deal of time on the process.
New Verses Used
In the current market, borrows with excellent credit ratings have no issues obtaining financing. Excellent is a score of 680 or higher. Those with subprime credit, or a score of 619 or below, may find the search for auto finance approval a bit more difficult. Many lenders are requiring 20 percent down on new car financing for these buyers. This means a $20,000 car loan would require a down payment of $4,000. Experts state data for car loans throughout the past year seems to indicate that those with subprime credit situations will likely have more luck in the used car market.