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Lower Loan Rates Are Lending Car Buyers a Hand

Lower Loan Rates Are Lending Car Buyers a Hand

By Jeff Youngs, March 05, 2012
One of the under-appreciated factors for consumers in the strengthening U.S. auto recovery has been how their personal balance sheets have been looking better and better over the last year or so. While the troubles of the housing sector remain a massive overhang on the American economy, outside of those woes, consumers have been boosting savings and reducing debt.

That has been playing out nicely in the car market, where lenders are now charging U.S. car buyers the lowest interest rates in at least four years as fewer borrowers fall behind on their payments, according to  Experian Automotive. That, in turn, helps support the growing demand for new vehicles.

The average interest rate for a new-vehicle loan fell to 4.52 percent in the fourth quarter, according to Experian, in a Bloomberg story, down from 4.84 percent a year earlier-and the lowest level since Experian began tracking the figure in 2008.

Tighter credit availability, of course, was one of the major triggers for the implosion in U.S. auto sales in 2008 and 2009, with some auto brands getting out of the financing business largely or entirely for a time. As a result, levels of vehicle leasing also nose-dived as the Great Recession took hold. But nowadays, financial companies are boosting lending to auto consumers, and the U.S. Federal Reserve is cooperating by holding short-term interest rates near zero, a level to which the Fed has committed at least through 2014.

So if rising gasoline prices  don't trip up American car buyers over the coming months, at least their chances of financing their purchases-and being able to afford the payments-are getting better all the time.
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