Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Aug 3, 2021

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Car shoppers can breathe a sigh of relief thanks to the improved availability of better car loan rates and terms. Whether you’re the 1st owner or the 4th owner down the line, there are more options. Owner ratings for used cars are readily available online as are refinance (and lower purchase) options.

An Experian report analyzing the last quarter discovered that consumer credit scores for auto loans fell close to pre-recession levels while lower car loan rates along with longer loan terms have increased auto purchase opportunities for buyers.

According to the report the average credit scores of those financing new cars fell by six points to 760. Similarly, credit scores for used cars fell by four points to 659.

These numbers are close to those seen in the first quarter of 2008, where credit scores were roughly 753 for new vehicles and 653 for used vehicles.

Financing has been more available in the last six months for both prime borrowers and those “with less than perfect credit histories,” said Paul Taylor, chief economist with the National Automobile Dealers Association (NADA) according to the Augusta Chronicle.

“If the average credit score for auto loans that are being made out there has fallen in recent quarters, then credit is clearly more available to a wider range of customers,” said Taylor.

During the recession, lending was limited to only borrowers with very strong credit ratings. This left subprime borrowers in a difficult position when seeking credit due to the higher car loan rates they would likely receive. “Banks were willing to lend money only to people who didn’t need it,” explained Taylor.

Banks Cash in on Auto Loans

Auto loans proved profitable for banks in comparison to home loans. According to NADA, this is due to the fact that car loans have a lower default rate and are needed for commuting, which makes borrowers less likely to default on payments.

“That’s one more reason that the recovery of loan availability has been progressing well over recent quarters,” said Taylor.

Banks have been aggressively seizing this opportunity to cash out on these relatively less-risky loans, according to Andy OHarrow, finance manager for Milton Ruben Toyota.

“The banks that are backed by the manufacturer are the most aggressive. They’ll do lower credit scores, better terms and low interest rates. Things have really loosened up, and things are pretty normal for us now,” said OHarrow according to the Augusta Chronicle.

What Else Should Shoppers Know about Auto Loan Trends?

According to OHarrow, most car loan originations are not driven by credit histories or scores. The deal making process, the down payment amount, and the length of the loan’s lifetime are usually what structures deals. Of course, the rate can be affected by traditional factors, but the process is fairly minimal.

“Typically, if you’re putting a lot of money down, you’re going to get a lower interest rate. The banks are weighing risk differently. If you’re putting $5,000 down, you’re obviously in a better position than the person who’s not putting anything down,” he said.

Current Car Loan Rates Put Cars in Arms Reach

Bud Lawrence, general manager at Bobby Jones Ford Lincoln, thinks that car loan rates are within closer reach today than in the past few years.

“In some ways, it would certainly make it easier to get credit because the customer may qualify better. When rates are so low…the bank may be willing to loan because the payment fits. They can make it match the customer’s income,” he said.

Brian Winters, general manager at Gerald Jones Honda, believes that lending has “loosened up quite a bit” in the past eight to 10 months. He notes that American Honda Finance Corp. is offering zero percent interest rates almost across the board according to the Augusta Chronicle.

“We’re seeing a lot of those customers that were having trouble getting approved for credit a year ago suddenly back in the market, and we’re able to get those folks approvals through the lenders,” said Winters.

“Lenders are offering better terms on car loan rates, such as no money down,” said Ronnie Sterling, general sales manager at Thomson Chrysler Dodge Jeep.

“If you’re in a position of inequity, banks are working with you to get in newer cars. A lot more people are tending to get into a new car now than they were four years ago,” he said according to the Augusta Chronicle.

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Is Now The Right Time for A New Car Loan?

If you’ve been considering buying a new car or refinancing your current one, many lenders have lowered their rates to open the door for more borrowers. You don’t need a personal connection to get an affordable car payment or avoid shady business practices. You can find affordable car payments online.