Interest rate forecast
For 2013, car shoppers can expect the trend of low interest rates to continue and to find it easier to get approved for a car loan. Credit is continuing to loosen, as the average credit scores that lenders are looking for to approve car loans will continue to decline. Consumers with the worst credit scores, those in the categories of nonprime, subprime and deep-subprime, increasingly are getting approved for auto loans, with a 13.6 percent increase for new car loans and a 5.47 percent increase for used car loans in 2012 over 2011, according to Experian Automotive.
Rate movement in 2012
Auto loan interest rates declined overall through 2012, according to Bankrate data.
Rates in January 2012 were at 4.38 percent on average for a 60-month new-car loan and 4.8 percent for a 48-month used-car loan, while in December 2012, auto loan rates were at 2.7 percent for new cars and 2.95 percent for used cars for the same loan terms. Though the overall rate declined, both new and used car loans saw several interest rate spikes in 2012, most notably in October 2012 when interest rates jumped about 0.5 percent for 60-month new-car loans and 1.5 percent for 48-month used-car loans.
What's a consumer to do?
Unless your credit is top-notch, it pays to give your credit a tuneup before applying for a car loan. Check your credit report for inaccuracies, put as much distance between late payments and the loan application as possible, and reduce your debit-to-credit ratio. Next, shop around for the best interest rate before you visit a dealer. It's likely that automakers will continue to offer cut-rate financing, but not everyone will qualify. Even those who do may find a better deal with a national lender or a local credit union.