Auto Loan Rates Hit Record Low
Apr 14th, 2010 @ 12:11 PM by Amber Nelson
Led by incentives from rebounding automaker Toyota, the average rate on U.S. auto loans fell dramatically in March, according to auto data tracker Edmunds.com.
In March, the average rate dropped to 4.4 percent, down from 5.3 percent in February. On a yearly basis, the rate fell even more significantly from 5.8 percent in March 2009. The current average is the lowest on record since the beginning of the Edmunds.com survey in 2002.
“Low interest financing is compelling for consumers because those who qualify often enjoy greater savings than they would get from a cash-back offer,” said Jessica Caldwell, senior analyst for Edmunds.com. “Low APR offers are also better for automakers, because they are less damaging to brand image and residual values.”
In the wake of some massive and devastating recalls, Toyota poured out the incentives last month, bringing its average APR down to 1.9 percent, from 4.1 percent in February. Apparently the low rates were enough to help consumers overcome fears about the company’s recent failures, because Toyota almost beat out the number one seller General Motors Co. in sales, leaving Ford Motor Co in third place.
“It can’t go on forever, but incentives have always been a part of the auto industry,” added Caldwell. “I don’t ever see them turning that off.”
Here’s how other company’s stacked up:
Mazda had the second lowest loan rate with 2.5 percent, while Mercury was next with 3.3 percent. Kia’s loan rate was highest at 7.1 percent.
Dodge had the longest average car loan term with 67 months. Chevy followed at 66.6 months, and Hyundai and Kia were both at 66.1 months. On the other hand, BMW had an average term of 52.4 months and Subaru’s average was 60.9 months.
With some experts saying that there is excess auto loan money available because of fallen demand, there is a good chance car loan rates could stay low for awhile.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.