Car Loan Rates are low but you’ll need either good Credit or a Big down payment

Everyone loves a great deal and today there are plenty of deals on new and used cars.  Getting your dream car financed in today’s tough credit market is still a challenge.  In the last few months major car lenders have eased their credit restrictions but are requiring substantial down payments.   Gone are the days when you could buy a new car with $0 down and your signature.  Most people that are shopping for new cars have a good enough credit score to qualify for the car but often do not have the money saved up for a large down payment.

Most Car lenders today want at least a 10% down payment on a new car purchase.  So if you are buying a $28,000 car you better have about $3,000 saved up.  For used car loans, most lenders now require a 20% down payment.  So if you are buying a $20,000 used car, you’re going to need at least $4,000.  This may be tough to tie up so much cash in an asset that depreciates quickly but a larger down payment lowers your loan balance and the monthly interest you will be paying. In the long run it makes good financial sense to put a large down payment down on expensive purchases.

The current national average rate for a new car purchase is just 4.5% verses 6.9% in the 2009 credit crisis.  That means you could be saving hundreds or even thousands each year on interest charges on that shiny new ride of yours.  So what does the future hold for car loan rates?  Perhaps even lower rates!  Car dealers have a glut of 2010 models on their lots and in recent weeks have begun to offer car loan interest rates of 1.9% to 2.99% percent. Now it a great time to go car shopping.  Also, there are whispers at banks that the return of the 0% new car loan might be making a comeback soon.

Be smart and always comparison shop for the best rates.