Car loans are cheap these days.
A new study by personal finance site WalletHub.com, showed that popular car brands offer financing at very low average APRs. Honda, Acura, Kia and Mazda have APRs averaging below 1 percent. Buick and Audi offer rates below 2 percent. Chevrolet, Lexus and BMW all came in under 3 percent. Ford and Fiat have the most expensive rates but still stay below 5 percent.
Moreover, you can tell through a historical viewpoint that today’s auto loan rates are indeed ultra-low.
Auto loans for new cars normally have lower interest rates than loans for used cars. But the gap is remarkably wider now. You’ll pay, for example, about 15 percent less interest on a new car loan than on a used car loan if you take out one today, says WalletHub.com.
However, the personal finance site only looked at 36-month auto loans when buyers these days look at 60-month or longer auto loans for more viable repayments.
The interest rates were also the ones people with excellent credit would get. People with low credit scores are still likely to get higher interest rates—even a double-digit, Bankrate chief financial analyst Greg McBride told Time.com.
According to Bankrate, the average APRs for auto loans are just below 5 percent as of February 20, 2014. But you would see most banks today financing vehicles at their lowest rates of under 3 percent—new or used.
WalletHub.com says credit unions offer new auto loan rates and used auto loan rates that are 40 percent and 44 percent lower, respectively, than banks. The average auto loan APR in credit unions is 2.24 percent for new cars and 2.54 percent for used cars for, again, a 36-month repayment period.
One reason why auto loan rates are super low these days is the growing competition among lenders. If you look at it closely, banks didn’t have to be this competitive because they have credit card and mortgage portfolios which are also lucrative. But auto loans are one of the few brightest spots in the lending business today. They just couldn’t ignore that.