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Auto loan rate forecast for 2016

Auto loans

Auto loans

Auto loan rates were among the lowest in 2015, with new and used car loan rates hovering below 3% for people with good credit. A competitive market and pent-up demand from consumers were the forces behind these low rates.

A similar environment is expected in the new year, although it could be dampened by the Fed's move to raise interest rates. "There's a lot of competition, which means lenders are competing very aggressively on the rates being offered," says Greg McBride, CFA, Bankrate's chief financial analyst.

Before shopping for a car, check your credit score for free at myBankrate.

While the timing of future rate increases by the Fed is uncertain, experts agree any move in interest rates is going to have a negligible impact on the automobile market.

"While interest rates may increase and drive payments up, this will only be done if the broader economy is improving and discretionary spending is increasing," says Eric Lyman, top analyst and vice president of industry insights at TrueCar Inc.

Also, the increase in the monthly payment due to an interest rate increase will be barely noticeable. If auto loan rates moved one-quarter of a percentage point higher, it would mean an increase of $3 per month on a $25,000 loan, McBride says.

Search for the best auto loan rates at Bankrate.com.

"Rising rates are not what consumers need to focus on," McBride says. "They need to focus on getting their credit in position to qualify for some of the rock-bottom offers."

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