Car loans best in years for all borrowers

Perhaps the most significant news for car shoppers is that the average credit scores for getting a new-car loan or a used-car loan have dropped almost to the prerecession levels, making it easier for more consumers to get car loans at lower interest rates. Currently, the average credit score for financing a new car is 760, just seven points shy of the 753 average in the first quarter of 2008. For used-car loan financing, the average credit score is currently 659, compared with 653 in the first quarter of 2008.

Not only is it easier for more consumers to get good interest rates on their car loans, but they also are likely to have lower monthly payments due to trends in lower interest rates and longer car loans. The Experian study noted that the average auto loan was now one month longer: It's currently 64 months for a new-car loan and 59 months for a used-car loan.

New-car loan interest rates dropped across all credit categories. They ranged from 3.21 percent to 12.89 percent, with a 4.56 percent average across all types of borrowers. Used-car loans ranged from 4.4 percent to 17.9 percent, with the only increase for deep subprime buyers with the worst credit. That went up slightly from 17.85 percent in the first quarter in 2011 to 17.9 percent in the same quarter in 2012. Loan rates are currently 9.02 percent for used cars on average.

Many car shoppers are using the longer terms and lower interest rates to buy a more expensive car for nearly the same monthly payment. Consumers financed $25,995 on average for a new car and $17,050 for a used car, representing $589 and $411 increases respectively over the first quarter of 2011. However, monthly payments remained almost identical from last year: $461 on average for new-car loans, a $1 increase over the first quarter 2011, and $346 on average for a used-car loan, a $3 increase.

While financing more car for the same monthly payment can be very appealing, getting a larger auto loan often means you are upside down for a longer period. That can cause financial headaches if the car is totaled in an accident or is stolen.

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