Auto Loans During Credit Crunch

It is true that American car makers are having problems with cash; nevertheless, they want to get business from you. Car makers are trying their best to win back consumer confidence that is lacking now. So, you can still get an auto loan at a favorable rate. You have to be prepared for a few things. Earlier it was easier for you to get an auto loan approved without much hassle. These days, lenders have become very stringent and you need to have a good credit score to get favorable terms for your auto loan.

However, the auto industry also faces problems similar to the mortgage market. In the last couple of years, auto lenders have approved too many auto loans. As recession set in, the number of borrowers making regular payments decreased. As such, there was a marked increase in the number of repossessed vehicles. The number of borrowers defaulting payments also increased manifold. As the availability of liquidity decreased with recession, consumers became more cash strapped. The sale of vehicles declined sharply. And for similar reasons, auto lenders are extending low-interest financing as well as heavy rebates to borrowers.

As per a survey that was conducted recently, major auto lenders found that borrowers are not willing to shell out more than 7% on a 5 year loan, even if they have a credit score above 700. Almost every car maker is reducing rate in financial deals and you can expect rates to be anywhere between 0% and 4.99%. The existing low-interest rates indicate that you can get an auto loan during credit crunch and if you negotiate a bit, you can get a good deal.

It is a well known fact that the only thing that is constant is change. And this phase shall pass too. Once the credit crunch is over, you can expect to get an auto loan as per your terms and conditions. Your favorite lender will be in a position to offer you favorable terms. Until then you need to keep close watch on your credit score, if you want an auto loan before the credit crunch is over.