As the auto loan market continues to improve, car shoppers may wonder where they stand. Stories of consumers who found it extremely difficult to get approved for a car loan were abundant last year.
Even though lenders are approving more car loans recently, car shoppers may not know that things are different from a year ago.
“It’ll be tougher than it was three years ago, but it will be easier than it was in the first half of last year,” John Murphy, lead U.S. auto analyst for Bank of America-Merrill Lynch, told the Detroit Free Press.
Murphy said he thinks more auto loan financing will be available and getting a car loan won’t be as difficult as it was last year, the Detroit Free Press reports.
It’s easier to get approved for an auto loan to buy a new car like the Hyundai Genesis right now compared to last year, which will help increase auto sales.
Consumers who needed a car loan the most were generally the ones with bad credit who couldn’t get approved. Now that credit seems to be thawing out, there could be some pent-up demand for auto loans.
According to CNW Research, consumers with prime FICO scores of 750 and higher are currently being approved for car loans about 90 percent of the time. The same group of car shoppers would have been approved for an auto loan about 60 percent of the time during the worst of the credit crisis.
Consumers with good credit scores of 650 to 749 are being approved for auto loans about 75 to 85 percent of the time now, compared with a 50 percent approval rate during the worst of the credit crisis.
Consumers with subprime credit scores of less than 650 are only being approved for car loans 4.8 percent of the time now, according to CNW’s data. This is down from a year ago, when this group of borrowers was being approved for auto loans 8 percent of the time.
If you fall into the subprime category, don’t lose all hope. There are lenders who may approve you for a car loan, but you will pay about an 18 percent interest rate on the loan. If you fall into the good and prime credit score categories, your chances of getting approved for an auto loan are much higher right now. Auto loan rates are still at record lows as well, meaning you’ll pay less over the life of the car loan.