Those who have been putting off their purchase of a new car during the recession may want to start exploring their car finance options now, since interest rates on auto loans have fallen to lows not seen in years.
The latest weekly Bankrate survey of major banks showed that the average interest rate on a four-year auto loan was just 6.21 percent – the lowest average rate in more than 20 years of tracking, according to USA Today. Edmunds' estimate is even lower – the car research website estimated that in December, the average interest rate on loans for new cars was just 4.16 percent. Though the Bankrate figure and that of Edmunds are not perfectly comparable, since the latter factors in dealer incentives, the most recent Edmunds figure is still significant – it is the lowest since the site first started tracking rates in January 2002.
One of the main reasons for the drop in auto loan interest rates is lender competition. Credit is slowly loosening, and lenders are trying to compete for borrowers by offering lower and lower rates.
The gradual credit expansion has also improved the car financing possibilities of borrowers with bad credit history – many lenders cater to such borrowers by offering them bad credit loans and other tools that help them plan for the purchase of an affordable, reliable vehicle.