CAR LOAN RATES HIT RECORD LOWS

WalletHub Auto Financing Report

With interest rates at record lows, depressed oil prices producing a consumer windfall, and the average vehicle being more than 11 years old, consumers across the country are no doubt contemplating a new set of wheels. In order to help prospective buyers find the best deals, the personal finance social network WalletHub released on February 10, 2015 its 2015 Auto Financing Report which analyzes auto loan and lease offers from more than 150 providers.

• Interest rates for both new and used cars are at their lowest point in the past few years.
  
  
• People in the market for a new car should start their search for financing with car manufacturers (rates 35% below average) and credit unions (25% belowaverage). National banks (roughly average), and regional banks (40% above average) should be secondary options.
  
  
• The average new car loan now charges 17% less interest than the average used car loan.
  
  
• It will cost you roughly four and a half times more to finance a car if you have fair credit versus excellent credit. This would amount to roughly $5,500 in extra interest paid over the life of a $20,000 five year loan.
  

The largest interest rate decrease since the beginning of 2014 was observed for people with excellent credit buying used cars. The average rate for this segment declined nearly 18%.

Is it a good time to buy a car? Consumers across the country have no doubt been asking themselves that question in recent months as an aging fleet of vehicles, the average car is 11.4 years old, drastically suppressed interest rates and improving economic conditions have set the stage for significant buying activity. And that is exactly what we’ve gotten with 16.5
million cars being sold in 2014.

Whether or not the good times will keep on rolling in 2015 remains to be seen, however. Most forecasts indicate that sales will grow ending the year with a record 17 million vehicles sold. But when you also consider expectations for rising interest rates as well as current global economic turmoil and depressed oil prices, which simultaneously make consumers feel flush yet unmotivated to buy fuel efficient vehicles, it’s obvious why opinions are mixed as to the auto industry’s strength in 2015.

With that being said, five of the seven auto industry and consumer spending experts we consulted for this report responded with a grade of seven or higher when asked:
On a scale of 1 (an emphatic no) to 10 (an emphatic yes), is now a good time to buy a car? “I would say 9 or 10 since we are looking at an improving economy in the USA but challenges abroad,” said Frank L. DuBois, chair of the Kogod School of Business at American University. “Consumers that have delayed purchases are now getting forced into looking for cars as maintenance and repair costs on older cars rise.”

In order to help people determine what approach is best in their particular situation we compared financing offers from 157 lenders including 27 community/small banks, 47 regional banks, 10 national banks, 52 credit unions, and 21 car manufacturers. Hopefully, the 92% of consumers who finance their automotive purchases will be able to make use of this insight, and quickly at that. Four of the seven experts we polled feel that auto financing offers will worsen over the next 12 months.

Who Offers the Best Rates?

Financing Offers by Car Manufacturer

It is important for consumers to understand that car dealership financing offers may originate from the financing arm of a car manufacturer or from a third-party financial institution. The following offers reflect financing available directly from car manufacturers’ financing arms.

Note: Above data is based on a 36-month term. The APRs presented for the financing and lease programs of the car manufactures are only informative. The actual values that one can obtain are based on various factors, including credit worthiness, income, location, promotional programs and, believe it or not, negotiation skills. Make sure to always check up front with a dealer about the availability of any discounts for particular groups (i.e. USAA members) that you might qualify for as well as whether any other costs and/or restrictions may be imposed, especially in the case of lease contracts.

Rates over Time

Note: Above data is based on a 36-month term. Bank averages in this section do not include rates from small banks and credit unions.

Manufacturer Transparency

Leasing offers are the most difficult type of car purchasing arrangement for consumers to understand as they lack the equivalent of an APR that can be used for comparison purposes. As a result, the transparency of manufacturers about these deals is integral to a consumer’s ability to make informed decisions.

Note: Above data is based on a 36-month term. Bank averages in this section do not include rates from small banks and credit unions.

© 2015 TLC Magazine Online, Inc.