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How to get the best loan rates

4. The skinny on auto loan rates

What impacts rates: Interest rates on auto loans can be pegged to either the prime rate or yields on Treasury securities. Rates are currently at their lowest in many years, although traditionally there is not a lot of movement.

"The average new car loan rate over the last seven or eight years has fluctuated between 7 percent and 9 percent, despite a Fed funds rate that has ranged from a low of 1 percent to a high of 6.5 percent," says Greg McBride, Bankrate's senior financial analyst.

Lenders use risk-based pricing. So, as is the case with other lending products, customers with the highest credit scores will qualify for the lowest interest rates.

Highs and lows: Bankrate's data on auto loan rates go back 10 years. Rates peaked in October 2000, and reached lows in recent months.

For example, the 36-month new car rate ranged from a high of 9.71 percent in October 2000 to a low of 6.89 percent in May 2008. Rates for 48-month and 60-month new car rates followed the same pattern, only slightly higher.

Used car rates run higher still. The 36-month used car rate ranged from a high of 10.82 percent in October 2000 to a low of 7.73 percent in July 2008.

Bankrate's Interest Rate Roundup gives you the latest information on auto loan rates.

How to get the best rate: Get a copy of your credit report and correct any inaccurate information. Check car-buying guides and Web sites and get a price range for the vehicle you're interested in before you step foot on the dealer's lot. Compare finance offers from various lenders, not just the manufacturer's finance arm at the dealership.

Despite the credit crunch, slumping auto sales have prompted some auto manufacturers to offer low-interest or zero-percent-interest financing on select models to qualified customers.

You'll need excellent credit to qualify for these deals and may need to pay the loan off in as little as 36 months.

If you have bad credit, you're going to run into two possible scenarios. "Some lenders just won't give you credit at all, and those that do are going to charge you a higher interest rate," McBride says.

For those with less-than-stellar credit, there is another option to consider -- credit unions. For the most part, these financial institutions use the same risk-based analysis that other lenders use, i.e., FICO scores, but with a twist.

"We don't make loan decisions based solely on FICO scores," says Phil Greer, senior vice president of loan administration at the Raleigh, N.C.-based State Employees Credit Union.

Greer says the credit union's loan officers analyze members' credit reports to find out if derogatory information reflects just a bump in the road.

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"If we can determine that the issues that caused the problem with your credit report were due to things like illness or divorce, and that's no longer hanging over your head, then we probably think you're in that percentile that is probably going to pay us rather than default on the loan," he says.

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