Average Car Loan Rates Drop in 4th Quarter 2009

According to a new report from Comerica Bank, average car loan rates and auto affordability both dropped in the fourth quarter of 2009. The bank’s report, titled the Auto Affordability Index, revealed that the average auto loan rate dropped to 3.47 percent. This is good news for consumers wanting to buy a new car.

Data Regarding Car Loans and Affordability

When a consumer wants to purchase a vehicle, there are a few major concerns, what the car’s interest rate will be when they finance and what the car costs. Interest rates for vehicles had been pretty high for a while. Depending on the type of car you wanted and your credit history, you rate could start at 7 percent and reach much higher.

With the average auto loan rate dropped below 4 percent, the cost of the car would lower over the life of the car loan.

The only problem is that auto affordability for buying a car dropped as well. The auto affordability is the number of weeks of median family income that is required to buy and finance an average-priced new vehicle. According to SubPrime Auto Finance News, the fourth quarter auto affordability dropped to 23 weeks from 21.8 weeks. This means it takes longer for a family to afford a car than it did a few months ago.

Why Is It Taking Longer to Afford a Car?

Despite auto insurance rates dropping, according to Comerica Bank’s data, the average cost of a new car in the fourth quarter increased 6 percent to $27,000. This would explain that despite the median family income increasing about 2 percent in the fourth quarter, it’s taking longer to afford a car.

Also, with the Cash for Clunkers program officially over, people have to work with smaller trade-in values for their existing vehicles.

If you’re looking for ways to make it easier to afford a car, there are specific factors that could affect your auto loan rate. If you’d like an idea of what your auto loan rate could be, visit Go Banking Rates’ auto loan section.