According to a survey released by the Federal Reserve, car loans are easier to get than they have been at any time in the last 17 years. Does that mean that they are practically falling out of the sky? Maybe not that easy, but banks have become willing to make lower interest loans and with more lax credit considerations.
The average rate for four-year new vehicle loans is down to 3.92%, but is dependent on your FICO. Fair or poor credit borrowers are still facing double digit interest rates. You can improve your chances of getting a car loan by keeping a few things in mind like:
- Have a down payment of 5-10 percent. The more money down, the better your approval rate will be.
- Do not rely on dealer finance. The average dealer will add 2.47 points to the interest rate they offer you in order to pad their profit margin.
- Know the average price for a car before you stop at any dealership. Do not focus so much on the monthly payment as the total amount borrowed. You will save money in the long run by negotiating hard and being willing to walk away.
- If you want to use dealer financing, remember the interest rate is negotiable.
Banks are loosening the purse strings, but you still need to borrow cautiously. Do not take on a bad car loan just because you can get approved. Negotiate fearlessly. Always remember that there are other dealerships and cars.