How To Qualify For The Lowest Auto Loan Rate
Finally there is some good news to report regarding the auto loan rate you can get in 2011. Things are starting to look up for consumers who want to finance their car purchases. Credit restrictions are easing for auto loans and auto loan rates have dropped considerably. Even people with imperfect credit scores can find financing for their car purchases, auto financing experts say. As always, however, your FICO Score will control the amount you can finance and the auto loan rate that you’ll pay.
The average auto loan rate fell to just 4.16% in January, 2011. The best auto loan rate available to you is for a new vehicle purchase. In fact, many dealerships are offering a zero auto loan rate on an assortment of vehicles if your FICO score is 740 or higher.
A 740 FICO Score Will Qualify You For An Auto Loan Rate of 0%
Overall, it has been reported that 15.4% of auto loans — nearly 1 in 6 — charge no auto loan rate at all. That’s right, 0 (zero) interest. Zero interest auto loan rates only apply to new car purchases. The typical auto loan rate for a used car remains at 8% or higher. Auto loan rates have fallen across the board in the last month, partly because of a general loosening of credit and partly because many automakers are subsidizing auto loan rates in the form of incentives to spur sales. In November 2008, for instance, a buyer with an excellent FICO score and a 60-month loan from a bank was paying an annual percentage auto loan rate of 6.54 percent. This same loan in December 2010 had an auto loan rate of 4.35 percent.
The chart below gathers other national averages auto loan rates for new-car loans as of December 1, 2010. These auto loan rates are only estimates, and actual auto loan rate will vary depending on the individual’s FICO score.
New Auto Loan Rates |
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Tier 1 (FICO Score of 720+) |
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Auto Loan Rate (Bank) |
Auto Loan Rate (Credit Union) |
|
| 36 months | 4.28% | 4.08% |
| 48 months | 4.29% | 4.18% |
| 60 months | 4.35% | 4.28% |
| Typical down payment required | 0% | 0% |
Tier 2 (FICO Score of 700-719) |
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Auto Loan Rate (Bank) |
Auto Loan Rate (Credit Union) |
|
| 36 months | 5.17% | 4.55% |
| 48 months | 5.18% | 4.65% |
| 60 months | 5.24% | 4.75% |
| Typical down payment required | 0% | 0% |
Tier 3 (FICO Score 670-699) |
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Auto Loan Rate (Bank) |
Auto Loan Rate (Credit Union) |
|
| 36 months | 6.39% | 5.59% |
| 48 months | 6.39% | 5.69% |
| 60 months | 6.46% | 5.77% |
| Typical down payment required | 0% | 0% |
Tier 4 (FICO Score 630-669) |
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Auto Loan Rate (Bank) |
Auto Loan Rate (Credit Union) |
|
| 36 months | 8.38% | 7.50% |
| 48 months | 8.40% | 7.58% |
| 60 months | 8.45% | 7.68% |
| Typical down payment required | 0% | 0% |
| Footnotes | ||
| Bank Auto Loan Rates are the average new auto loan rates from more than 900 lending institutions as of December 1, 2010. | ||
| Credit Union auto loan rates are the average new auto auto loan rates of several prominent credit unions as of December 1, 2010. | ||
Other Auto Loan Rate Factors: |
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| Note: These auto loan rates are estimates, and actual auto loan rates will vary from dealership to dealershop. In addition, factors such as inventory of total cars in stock, make and model and the amount of your down payment can make a significant difference in lenders’ auto loan rate decisions and the auto loan rate they charge. | ||
Prime borrowers (those with a credit score of 680-739) or “super prime” borrowers (with a credit score of 740 and higher). Super prime and prime borrowers are the people who tend to qualify for the heavily advertised low promotional APR auto loan rates. Automakers prefer to offer a low auto loan rate incentive instead of bonus cash rebates. They know not everyone will qualify for a low auto loan rate and the risk associated with lending to prime customers is very low risk.
It’s a different story for subprime borrowers. Subprime borrowers (those with FICO scores of 619 and below) have to come in with at least a 20 percent down payment. If you want to purchase a car that costs $15,000, you’ve got to come up with a minimum of $3,000 in cold hard cash. Subprime borrowers must also be prepared to prove their stated income with a pay stub. The lender may also call a person’s workplace to verify employment. Fewer people might be bad credit risks these days, but lenders aren’t taking any chances. If you want to avoid these hassels then there is a way to raise your qualifications from a “subprime” borrower to a “Prime” or “Super-Prime” borrower. Keep reading…
What’s the moral of this story? Before you go out and take advantage of the Low Auto Loan Rate incentives being offered make sure that you have a good FICO Score. If you don’t know what your FICO score is then get FREE access to your FICO score here! If your FICO score is below 740 (the score you need to qualify for a zero auto loan rate) then you can should get a copy of the FREE GUIDE that will show you how you can force the credit bureaus to remove all of your negative credit items. That’s right. Even valid negative credit items can be deleted legally from your credit report. To learn how to restore your credit and FICO score to 740 so you can qualify for a zero interest auto loan rate click-here now!
