Credit Eases as Car Sales Rise
According to Experian, lenders have provided car buyers with some of the most favorable credit terms since the financial crisis of 2008. The easing credit climate is illustrated by lower interest rates, expanded lending to sub-prime customers, and longer loan repayment terms, helping to keep demand for new cars strong.
Experian reported that during the first quarter of 2012, new-car buyers financed an average of $25,995, or $589 more than in the same period in 2011. The average loan term increased by 1 month to 64 months, while the average interest rate dropped .27% to 4.56%, helping to keep monthly car payments nearly the same as last year.
Relaxed credit terms applied to the used-car market, too. Used-car buyers financed an average of $17,050 during the first quarter of 2012, which is $411 more than during the same period last year, and borrowers extended loans from 58 to 59 months. Interest rates fell .06% to 9.02% for the average used-car loan. Nearly 10% of used-car buyers financed their purchase for more than 60 months.
One reason that credit is easier to get for car loans is that they proved to be safer than mortgages and credit card loans during the recession. Studies have found that owners make paying for their car a priority because they need it for commuting to work, as well as when finding a new job.