Car Loan

This time last year, getting a loan for a new car was manageable for those with good credit scores. Now it seems lenders are more willing to step out of their comfort zone. Banks have cut their car loan interest rates in half to attract more customers. According to the personal finance website, banks that offered lending rates of seven or eight percent are now offering three or four.

In their back offices, the banks are seeing greater demand for auto loans repackaged as securities, which in turn enables them to lend more money. Credit unions and automotive financing companies are also competing. Data supplier, Experian Automotive, has reported 18 percent more car loans in the last quarter of 2010 going to applicants with credit scores below the middle-tier number of 680. On top of all this, zero-percent interest loans are currently available from Chrysler, Ford, General Motors and Nissan.

There is another reason why shoppers are coming back into the showrooms as things generally ease back to normal – leasing. Acura, Cadillac and Honda have "no money down" lease deals. Chrysler is offering a cash allowance of $2,500 on the 2011 200 mid-size sedan that can be used to reduce or eliminate the fee due at signing or cover the payments for a few months.

Remember that lease deals may also be negotiated, just like a car's purchase price. It isn't too hard to push the mileage limit up or haggle for lower monthly costs. Leasing usually means cheaper payments than buying because the customer is paying only the depreciation costs. Because the economy is now picking up, a leased car will still have a decent market value after three years.

Nariman Behravesh is chief economist with IHS Global Insight, a company that provides financial information. He has forecasted that the housing and automotive industry sectors will improve over the second half of this year (he scored a 90-percent success rate with his predictions for 2010). So this would be a good time to acquire a new vehicle while it's still a buyer's market and there are deals to be had.

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Colin Ryan has driven hundreds of cars thousands of miles while writing for BBC Top Gear magazine, Popular Mechanics, the Los Angeles Times, European Car, Import Tuner and many other publications, websites, TV shows, etc.

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