Record Low Interest Rates on Car Loans
The cost of financing a car has hit a record low according to Edmunds.com. The average interest rate on car loans last month was only 4.4%. This is down from 5.8% just a year ago.
While this may not seem like a big drop, the typical car buyers is actually saving over $1,000 in financing costs compared to last year.
We can thank Toyota for starting the incentives war after they introduced 0% financing following their recall fiasco. Although Toyota has scaled back their incentives to certain regions, other car makers have picked up the slack.
GM, Ford, Nissan, Chrysler, Mazda, Suzuki and Saab all offer 0% financing on some of their models. Even Porsche is offering 1.9% financing on all models except the Panamera.
Banks and credit unions have also become more competitive with their car loans. Last year, it was very difficult to get financing even if you had great credit. Now, many car buyers can secure financing without having to pay outrageous interest rates.
One word of caution: Don't assume you automatically qualify for the low-rate financing offered by the car manufacturers. Many still require you to have great credit. Nothing is worse than going to a dealership thinking you're getting a low interest rate only to discover you don't qualify.
Always have a backup plan and make sure you secure financing before going to a dealership. Securing financing doesn't mean you have to use it. The dealer will usually try to offer a better rate than what you already have.
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