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Archive for August, 2013

How Do Auto Lenders Decide What Interest Rate to Charge?

For those who are planning to buy a new car, finding the best car loan interest rates is a must. This is because the rate one gets significantly affects the overall cost of the vehicle. Getting a higher rate means paying more interest for the duration of the loan term.

If you are shopping for a car, know what factors affect car loan interest rates. This way, you can get an idea of what rate you will get and understand why such rate was given.

1. Prime Rate

One of the major factors that influence the interest rates given by lenders for car loans and other loan products is the prime interest rate. Banks also use this rate as basis when deciding on the best rates they can give their customers.

The prime interest rate is decided based on the interest rates set by the ten biggest banks in the United States. It changes once seven out of the ten banks modify their individual rates. The prime rate is reported by the Wall Street Journal.

2. Market Conditions

Car loan interest rates are also influenced by the country’s economic situation. In tough economic times, interest rates are dropped. The reason behind this is that the prime rate is also affected by yet another rate, one determined by the Federal Reserve: the federal funds rate. In a time when market conditions are less than favorable, the federal funds rate is reduced to boost the economy. On the other hand, when the economy is doing well, this rate is increased to control inflation.

When the economy is bad, dealers also drop their rates to convince car buyers to opt for brand new vehicles instead of the pre-owned variety. They may even offer 0 percent financing. The auto industry tries to sway customers by giving financing rates more attractive than those offered by local banks. The reason behind this is that the interest rates offered has a big impact on the affordability of a vehicle. If vehicles are made affordable, people are more likely to buy.

3. Credit Score

Unlike the aforementioned two, this is one factor you have control over. Lenders offer their best car loan rates to borrowers who have good to excellent credit scores. It is important to note that not all banks base their interest rates on the prime rate, so you may find a lower rate at a credit union. Shop around to find the best deal.

4. Age of Vehicle

The age of the vehicle to be purchased is an important factor because some lenders determine the interest rate they will give based on it. The general rule is that new cars come with lower interest rates than used ones, but know that this may not always be the case.

5. Place of Residence

Lastly, the area where you in live in the country matters. Believe it or not, some places offer lower rates for financing than others.




 


 

Are Risky Loans Really Driving Auto Lending Growth?

Auto loans made up the bulk of consumer lending increase in June this year, a sign that auto lending is up.

While concerns about whether auto loans made to borrowers with non-stellar credit are causing the recovery, the Federal Reserve Bank of New York (FRBNY) found that subprime auto loans are still below pre-recession levels.

Auto loan origination started declining in 2008 at the onset of the financial crisis. The third quarter of 2009 was an exemption with the Car Allowance Rebate System a.k.a. “Cash for Clunkers” that slightly affected overall originations.

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About 23 percent of new car loans in the second quarter of this year were issued to risky borrowers or those with credit scores lower than 620. The figure for this exact segment years before the crisis hit was around 25 to 30 percent.

Meanwhile, new auto loans issued to borrowers with credit scores above 720 settled at 45 percent this year. It peaked at more than 50 percent during the crisis.

The figures show that auto loans, in general, have not reached the highest levels in the pre-recession years. It is chiefly because young people are not borrowing as often and as much as they used to.

People aged 18 to 29 are borrowing the least so far this year. Meanwhile, older borrowers have reached or exceeded the amounts of auto loans they had originated in the pre-crisis years. Other groups are still behind their pre-recession peaks.

Consumers, in general, have been willing to purchase new cars by financing them. But the younger members of the population seem to draw from auto loans and mortgages as higher student debt burdens them.

 


 

Buy Here Pay Here Car Lots in Las Cruces, New Mexico

Do you live in Las Cruces, New Mexico? We’ve got a list of some buy here pay here car lots you can find around town.

Buy here pay here dealerships are often easy to find. Just look for signs that say “in-house financing,” ” we finance,” or “BHPH,” among others.

But you have to be extra careful when working with buy here pay here dealers. Many of them are dishonest in the way they do business. You want to watch out for these when you go out there to seek a car and financing.

So before you actually shake hands with a buy here pay here dealer, verify its legitimacy first and read the contract thoroughly. Also, you can always walk away if you don’t feel comfortable with how a particular dealership treats you.

Buy Here Pay Here Dealerships in Las Cruces, New Mexico

DANNY GAMBOA CASA DE AUTOS
715 E. Amador Ave.
Las Cruces, NM
88001
US
Phone: (575) 527-0272

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BASE AUTO SALES LLC
490 B North Valley
Las Cruces, NM
88005
US
Phone: (575) 526-4793

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CREDIT CARS
355 S Valley Dr
Las Cruces, NM
88005
US
Phone: 575-523-8398

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SISBARRO TRUCK STORE
355 S Valley Dr
Las Cruces, NM
88005
US
Phone: (866) 848-3317

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Buy Here Pay Here Car Lots in Rialto, California

Need new set of wheels but got bad credit? Try visiting a buy here pay here car lot. We’ve got some listed below. You can find them around Rialto, California.

Buy here pay here dealerships sell used cars and provide financing at the same time. They don’t work with banks and credit unions to help their customers find funds for their car purchase. Instead, they themselves provide the money.

With that kind of service, buying a car from a buy here pay here car lot seems convenient and easy. But you have to watch out for some dealers who charge ridiculously high interest rates.

Buy Here Pay Here Dealerships in Rialto, California

CREDIT AUTO SALES
523 W Foothill Blvd
Rialto, CA
92376
US
Phone: (909) 562-0977

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2 BROTHERS AUTO SALES
1000 New York Street Ste 103
Redlands, CA
92374
US
Phone: (909) 307-0737

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INLAND WHOLESALE AUTO CENTER
10150 Cedar Place
Bloomington, CA
92316
US
Phone: (909) 877-1337

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A AUTO SALES
19060 Valley Blvd
Bloomington, CA
92316
US
Phone: (909) 874-0567

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Reasons for Subprime Auto Loans’ Comeback

Subprime auto loans are booming again. The latest data from Experian Automotive showed that auto loans made to subprime borrowers or those with credit scores lower than 700 in Vantage scale are slightly up in the second quarter of this year.

From April to June, 35.2 percent of auto loans are subprime, up from 34.9 percent in the same period in 2012.

According to National Public Radio (NPR), a non-profit media organization, there are four reasons why subprime auto loans are alive again.

subprime auto loans

First, lenders offering subprime car loans can charge interest rates of as high as 25 percent.

Second, fewer borrowers are defaulting on their loans. People are prioritizing car loan payments as they need their cars to drive to work.

Third, prices of pre-owned cars are at almost historic highs. In case borrowers default, lenders can still get almost all their money back—or maybe even more if they need to repossess the car and sell it at an auction.

Lastly, lenders can sell packaged auto loans to Wall Street which breaks them into pieces and sell them to investors.

In addition, the repossession rate dropped by 15 percent to less than one percent based on Experian Automotive data.

Auto loans that are 30 days delinquent also fell from 5.6 percent last year to 2.38 this year. It is the lowest second-quarter 30-day delinquency rate for the past seven years.

There are concerns about the likelihood of subprime borrowers getting stuck in auto loans they can’t afford to pay off. However, subprime auto loan rates may fall as lenders compete for the business of people with non-stellar credit.

 


 

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