Auto Loan Rates Hit 4-Year Low
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UPDATED: Feb 9, 2021
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Due to the current trend of borrowers keeping current on their vehicle financing, lenders are charging auto loan borrowers at the lowest interest rates seen in t he past four years, according to Experian Automotive.
The average interest rate for new vehicle car loans fell to 4.52 percent in the fourth quarter of 2011, bringing the average rate to the lowest point since Experian began monitoring average auto loan rates back in 2008. One year earlier at the same time, the average rate was 4.84 percent.
Experts believe this rate is continuing to drop due to the fact that car financing lenders have seen surprisingly few defaults.
“Lenders are clearly on much more solid ground than they were two or three years ago,” said Melinda Zabritski, Experian’s director of automotive lending, in a press release. “With delinquencies and total dollar volume at risk down, lenders have been able to adopt more aggressive strategies.”
Those aggressive strategies include lending to subprime borrowers—something few lenders in other industries would be willing to do given the problems subprime lending caused in the housing market.
The auto loan industry saw a 13.8 percent increase in financing to nonprime, subprime and deep subprime customers in the fourth quarter of 2011.
“The confluence of low interest rates, longer loan terms and an increase in loans outside of prime provide a great opportunity for more people to find a vehicle that suits their needs,” said Zabritski. “With more lenders aggressively competing for business, it’s a great time for consumers to buy or finance a vehicle.”
Lenders willingness to provide subprime borrowers with car loans produces positive results not only for individual borrowers seeking a new vehicle, but also the economy as a whole since many subprime borrowers were victims of the failed housing market, and are, in reality, not real credit risks.