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Latest Developments Make Finding A Loan For A Car More Doable
It’s been challenging, to say the least to get a new car since the recession began. Only those with spotless credit histories probably got a loan easily. For many consumers, qualifying for the loan was a struggle – regardless of where you went for financing – the car manufacturer or your own credit union or bank. You’ll be glad to hear that at long last circumstances are starting to turn around.
Why Things Were So Bad
Lending money comes from the asset-backed securities market. Loans are bundled and sold to investors. When investors buy those bundles, more funds are available for making loans. Just as it always has, the financing pendulum swings back and forth. When lenders get burned, they make the requirements stricter more than reason calls for. Yes, consumers were getting loans they couldn’t afford – both for homes and cars. It was too easy to borrow. Anybody could see that terms like zero down payments and qualifying based on stated income would result in more failed loans. The available funds available for car loans dried up when the mortgage loan market crashed. Investors were suddenly much less enthusiastic to take a chance. With fewer loans available, only consumers with credit scores above 730 could get a loan. Buyers with high credit card balances or credit problems couldn’t get financing.
How It’s Getting Better
Two things have changed in recent months. Lenders and investors have become more willing to make loans to consumers with less than perfect credit, so more funds are available. Consumers’ expectations are different, and they’ve changed their financial practices in ways that will help them obtain car loans.
Recent months have seen the slackening of lending requirements. The pendulum has reached its peak, stopped momentarily, and is now going back the other direction. Car shoppers with credit scores between 620 and 730 can now qualify for auto loans. They’re also considering consumers who have income, but also have a foreclosure on their record.
Their newfound ability to qualify for a loan can also be attributed to borrowers’ financial practices. They are doing what is needed to get approved, and their expectations are more reasonable. They’re improving their credit scores, saving up a sizable down payment and reducing the balances on their other loans and credit cards.
The easy credit of 2007 & 2008 is long gone, though. Getting approved will be difficult for consumers with bad credit or big balances on their trade-ins. And a healthy down payment is a must. Factory rebates don’t usually count as downpayment funds, although GMAC permits it.
As car dealers see their closing rates improve, they are able to sell more cars. This creates more jobs, enabling more people to buy cars, homes and everything else. Lending requirements will continue to relax as long as borrowers keep making their payments on time. If only they would stop at a reasonable level. Years and years of data should show the ideal lending practices – those terms at which new loans are relatively high and loan failures are relatively low, maximizing profit. But everyone knows that the pendulum cannot be easily stopped.
Written by Hannah Valez. Nissan Truck San Bernardino Riverside County Cars