Ultra-low auto financing offers are everywhere and it may be easier to qualify for these super deals than many people realize.
Everything must go
“The companies are offering low interest rates on anything and everything with wheels on it,” says Art Spinella, vice president of CNW Marketing Research in Bandon, Ore. “This isn’t going to stop anytime soon.”
Auto manufacturers want a repeat of the record auto sales they enjoyed in 1998, and
rebates and super-low financing deals help spur sales.
Auto manufacturers have been using super-low financing as a marketing ploy for a decade, but experts say the latest round of incentives is broader than ever.
Not that long ago, landing a super-low rate meant swinging 24-month financing, a difficult task for many people. But many of the rock-bottom rates are now available on longer loans — and on more models.
Just how hard is it to qualify for today’s super financing deals? It’s tough, but not as tough as in years past, even though they are reserved for customers with very good credit or “A” credit quality.
Each lender has its own specific credit criteria, but one lender describes a customer with “A” credit this way: “Excellent credit depth with numerous accounts and virtually no derogatory items. Clear ability to pay. Stable job and residence.”
“It’s kind of a moving target,” says Brent West, vice president of marketing for Auto One Acceptance Corp., an indirect auto lender based in Dallas. “It varies from lender to lender. Some lenders are very conservative.”
And experts point out that credit criteria change with the times, as well.
“People can get a car loan today that never would have got a car loan five years ago,” Spinella says. “That’s just a reality.”
Willing to take a chance
Some of this apparent loosening of lending standards is pure economics. Because interest rates are so low, lenders — and that includes auto manufacturers’ finance companies — are willing to accept a little more risk and give loans to more people.
“There’s a larger universe of customers who can take advantage of an ‘A’ rate because the cost of capital is so low,” West says. “As the cost of capital increases, the prime lenders tend to tighten up their credit criteria.”
So not only are there more low-rate offers available, it seems more people may qualify. But before rushing off to that auto dealership, experts urge people to do their homework first. It’s still important to shop around for financing. Find out what rates banks and credit unions offer.
“They can charge whatever you agree to pay. That’s why you need to be armed with a credit offer before you step on the dealer floor,” says Jean Ann Fox, director of consumer protection at the Consumer Federation of America. “Monitor your credit report so you can catch any errors on it that might make you look like a worse risk than you are.”
Also keep in mind some low-rate financing deals require a large down payment. And some dealers may say these low-rate deals require undercoating or some other add-on. Don’t believe it.
“There’s no instance where it’s honest to say if you don’t buy this we’ll charge you a higher rate,” says Mark Eskeldson, author of the book
What Car Dealers Don’t Want You to Know. He also runs the Web site
CarInfo.com, which provides information on how to buy a car.
And don’t believe it if a dealer says the low rate requires paying the sticker price.
“Individual salespeople will tell you a lot of things in an effort to up their commission,” says Jack Nerad, author of
The Complete Idiot’s Guide to Buying or Leasing a Car. “I’d just go to another dealer.”