The New Rules Of Car Buying Rule 2
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Written by Terry J. Schultz
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Monday, 09 February 2009 |
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LENDERS ARE PLAYING TOUGH, BUT ONLY WITH SOME BORROWERS (HINT: NOT YOU)
The credit crisis has hit auto loans too. "The availability of credit is worse than it was six months ago," says Libby. GMAC, for example, no longer lends to any car buyer with a credit score below 700.
But as long as you have good credit, you can still borrow to buy a car. Today's median credit score is 720, and the auto-loan world looks different depending on which side of that line you're on. With a score below 720, you'll find that no-money-down deals are hard to come by. You'll likely need to pony up at least 10% to 20% of the price, says Jesse Toprak of Edmunds.com.
But with a score above 720, tighter lending rules simply mean that you could end up in a shorter loan than you might have a year ago. Lenders are pushing loans no longer than five years. Six- and seven-year loans are now tougher for all borrowers to find-and more expensive if you do get one (you'll pay as much as a percentage point more vs. the five-year rate). The upside: You'll pay less interest overall, and you're less likely to owe more than the car is worth when you sell.
Finally, as a good credit risk, you'll qualify for an interest rate as low as 6% on a five-year bank loan and less than 5% at some credit unions.
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Last Updated ( Monday, 09 February 2009 )
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