Auto Delinquencies Are Down – And So Are Interest Rates

More Americans are getting back on top of their car payments, according to credit ratings agency TransUnion. The company’s latest data show that just 0.53 percent of auto loans were 60 days or more delinquent in the second quarter of the year. That’s down 20 percent from the first quarter and 27 percent from the previous year, accounting for the largest yearly drop in nine years.

“The national trend we are seeing continues to point to a clear improvement in payment behavior,” said TransUnion’s Peter Turek as quoted in the Wall Street Journal. “Although part of the reason for the turnaround in delinquency rates is the influence of new, lower risk loans, consumers do not see a quick fix to the short-term economic and employment situation.”

At the same time that consumers are making more timely payments, they are building and repairing their credit. And that bodes well for new car sales and for auto loan refinancing. Car loan interest rates have dropped along with the general easing of rates in the financial markets, which means people with high interest car loans can save a lot of money by refinancing now. Rates for borrowers with really good credit scores are as low as about 5.7 percent, with the range stretching up to 18.5 percent of bad credit borrowers, according to Yahoo’s Auto Finance Center.

Refinancing is not expensive like mortgage refinancing and the process is simpler and faster. And of course, it’s money-saving. The Washington Post gives this example:

Let’s say a borrower is paying 10 percent on a $20,000 loan. The average rate to refinance a three-year-old car right now is about 8 percent, according to Bankrate.com. So refinancing on average would save around $250 a year. That adds up nearly $1,000 over the life of a typical four-year loan.

Credit standards are still tight, but if you’ve been able to get a car loan within the past year or two, you can most likely qualify to take advantage of these new, lower rates.

One Response to “Auto Delinquencies Are Down – And So Are Interest Rates”

1. Mortgages says:

   September 4, 2010 at 3:12 am

   Intresting