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Easier Qualifying for Car Loans Fuels Auto Industry

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On: Sat, Jun 29, 2013 at 11:34AM | By: Elizabeth Puckett


Easier Qualifying for Car Loans Fuels Auto Industry

People looking for car loans lately have likely noticed that getting approval has become much easier. Financiers are now making it easier to get a line of credit, even if the borrower has higher risk factors and less than ideal credit. This better access to financing has led to skyrocketing sales in the auto industry. U.S. auto industry experts are reporting the best sales since the year 2007.

This growth appears to be very healthy and experts say that it’s not likely that this is going to backfire like it has in the past. The situation is being called “rather well managed” by the senior director of auto credit at Experian Automotive.

Banks really don’t have much choice but to lend more broadly if they want customers. Not many people were left with their credit intact after the recession impacted so many American households and credit scores.

A new trend for auto financing is to payback over much longer periods than traditional auto loans. Longer payback time means lower monthly payments for buyers. As long as you are willing to overlook the higher payout price because of interest paid over a longer time period, this could be a good option for families still struggling to get back on their feet in a recovering economy.

This may end up being a problem for consumers who plan to buy again before their loan is paid off because they will end up owning much more than the then current value of their car. Buyers who plan on sticking with their car won’t notice much of a difference, but hanging on to a car for 10 years or more is not exactly what the auto industry wants either.

If people who choose to finance do choose to extend their loan payback, they will find that the value of their trade-in will not touch the amount owed if they decide to trade up within three or four years. Because they will owe far more than the vehicle’s value, they will have to either keep the car or cut their losses, which has some a little wary of where that might leave the industry in a few years.

As for now, everything is good, with United States auto sales increasing by an impressive 8.2% for the first half of 2013. Sales are even expected to soar past 15 million by the end of the year—this would be the first time since the industry fallout.

Interest rates for five-year new vehicle loans are a little over 4%, an astoundingly low interest rate. The average qualifying credit score is also now only 755, compared to the asking 770 in 2009 and 2010 for a loan at all.




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