New Landscape For Auto Loans In 2009

April 17, 2009

It’s official. The figure for 2008 auto sales rank as the worst in 16 years and there is every indication that 2009 is slated to be worse still. In a desperate move to get their inventory moving again and clear off hundreds of lots, auto dealerships are considering amazing offers on loans and other financing.

Low-interest financing and generous cash rebates are being offered to creditworthy customers. The strategy is being touted as a new era of bargains.

According to Edmunds.com, the average incentive amounts for each vehicle were in the neighborhood of $2,900; an 18% increase from the previous year.

The site also noted that automakers were giving larger incentives to trucks and luxury cars; about $6,600 per car and $5,400 for trucks. Lower prices and incentives like rebates and low-interest loans are changing the landscape for auto lending (and auto sales) in the new year.

While the Detroit Three continue to suffer the largest losses, the state of the auto market in general is facing tougher times. For example, Toyota, one the stronger carmakers lately, is facing the closing of a manufacturing facility, the first such loss in seventy years. The sales of foreign luxury automobiles have slumped during the market downturn.

With the rates of federal funds nearing zero, there is more money available for auto financing at decent prices. Even though banks continue to charge more 6% interest on their loans, many credit unions are offer much better deals to potential car buyers.

In addition, the foreign automakers may have more capital available to provide loan than American counterparts. There are plenty of zero-percent interest offers out there for the taking, if you know where to look.

There seem to be plenty of reasons to make a purchase sooner rather than later since many of these incentives may vanish by year’s end.