Borrowers hoping for a rock-bottom rate on an auto loan as a result of the Federal Open Market Committee cutting the federal funds rate by at least 75 basis points today may find themselves disappointed. Auto loan interest rates probably won't budge.
"Auto loan rates don't move around a whole lot, particularly those offered by banks and credit unions," says Greg McBride, senior financial analyst at Bankrate.com.
"When the Fed
cut rates from 5 percent to
4 percent, that was more significant
to the rates that borrowers
were seeing than it will be
when the Fed cuts the federal
funds rate below the 1 percent
mark," he says.
Plus, the credit crunch has settled in for the winter. For borrowers, that means easy financing is out, good credit scores and large down payments are in. That trend is unlikely to change in the near future.
"The tighter underwriting guidelines are here to stay for the foreseeable future; we're not going back to the days when anybody that could fog a mirror could get a loan," says McBride.
Borrowers with good credit and a sizable down payment won't find the actions taken by the Federal Open Market Committee much help on the interest rate front, but financing is still available.
Those with poor credit, on the other hand, may have some trouble getting a bank to lend them money.
According to Mike Celuch, chief financial officer of Paragon Federal Credit Union, credit scores somewhere below the lower 600s on the FICO scale may find themselves shut out -- or, in the best case, saddled with a high interest rate.
"I think it's going to be a function of the rate and so forth -- they may be able to qualify below that, but what kind of rate they'll get depends," Celuch says.
with good credit scores shouldn't
have a problem. "In the mid-700s
they should be fine," he says.
Check out this Bankrate calculator to determine whether a new or used car will be best for you.