If you’re shopping for that perfect car, there’s good news in store for you. Even buyers with less-than-stellar credit are qualifying for auto financing these days, as credit markets loosen up and manufacturers work with creditors to extend financing deals. That next new or used car might now be within reach if you check on the current interest rates and use an auto loan calculator to figure out your monthly payments.
It’s getting easier and easier to secure auto financing these days. According to the Associated Press, car loan approval rates have gone up in the past year for everyone. The biggest jump was seen in subprime auto lending, where approval ratings have improved to about 9%, where they are hovering now.
Historically, the approval rate for borrowers with bad credit ran about 60%. That was before the housing bubble and resulting credit crunch, though. After the crunch, subprime borrowers were facing a dismal 5% approval rate on auto loans until recently. Auto loan calculators can help you figure out what interest rate you can afford on a new or used car loan.
There are probably a number of reasons for the boost of available credit. First, interest rates are still low and even falling among banks that lend to each other. Also, borrowers who are struggling to pay their bills will usually continue to make their car payments, largely because they rely on their vehicles for transportation to and from work.
In addition, auto loans are somewhat less risky than other types of consumer lending because banks can take possession of vehicles when consumers can’t make the payments. If they do, financers stand to recoup most of their losses when selling cars they’ve repossessed because there are still plenty of buyers out there, most of whom also have decent access to credit.
In fact, GM recently announced that it’s getting into the subprime auto market through its purchase of AmeriCredit Inc. This will allow the manufacturer to offer direct financing deals for customers with poor credit that come into its dealer showrooms. The company said too many prospective buyers weren’t able to secure credit from outside sources, and it hopes to boost its sales by extending credit to subprime borrowers.
If your credit isn’t outstanding, the credit market improvement means you can probably buy your next car now. You may be expected to have a larger down payment, and you’ll probably pay more in interest than other people with better credit. Be prepared to show good sources of steady, reliable income to verify your ability to repay the loan. Then shop around for the best deal on a new or used car, and calculate your monthly payments with an auto loan calculator.