Auto Loans for Ordinary Buyers Once More

If you have tried to obtain a new car in recent months, you probably realize that it’s not as easy as it once was. Car shoppers with near-perfect credit probably qualified easily. For many consumers, qualifying for the loan presented a challenge – regardless of where you went for a car loan – the dealership or your own financing institution. The good news is that at long last things are beginning to change.

Why Things Were So Bad

The asset-backed securities market provides money for loans. Loans are grouped and sold to investors. When investors buy those packages, more funds are available for making loans. The financing pendulum swings back and forth as it always has. When lenders get burned, they tighten up more than is reasonable. It’s true that consumers had been qualifying for loans they could not afford – for cars, homes and a variety of other things. It was too easy to borrow. Higher default rates are clearly the direct result of terms like zero down payments and qualifying based on stated income. When the market for mortgage loans crashed, the pool of funds for car financing disappeared too. Investors were suddenly much less willing to take a chance. The fewer available loans went to consumers with super-prime credit – those with credit scores above 730. Buyers with high credit card balances or credit problems couldn’t get financing.

Where We Are Now

Recent months have seen two major changes. The availability of funds has increased, with lenders and investors willing to make loans to consumers with less than perfect credit. People have changed their financial habits in ways that will help them qualify for financing, as a result of new expectations.

Recent months have seen the relaxing of lending practices. The pendulum has reached its peak, paused, and is now headed back the other direction. Car buyers with credit scores between 620 and 730 can now qualify for auto loans. Even car shoppers who have a foreclosure on their record but still have income are being considered.

Car buyers, too, are responsible for their new ability to get a loan. Their expectations are more realistic, and they’re doing what is required to qualify. They are working on their credit reports, saving up a respectable down payment and reducing the balances on their credit cards.

It’s still more difficult than it was back in 2007 & 2008. Getting financed will be difficult for car shoppers with large balances on their trade-ins or poor credit. And a healthy down payment is a must. Factory rebates don’t generally count as downpayment funds, although GMAC allows it.

As dealerships see more buyers qualify, they are able to sell more cars. This creates jobs, allowing more car shoppers to buy cars, homes and a variety of other products. Lending requirements will continue to relax as long as borrowers keep making their payments on time. If only they would stop at a practical level. Many years worth of of data should show the ideal lending requirements – those terms at which the largest number of people can qualify and loan failures are relatively low, maximizing profit. But everyone knows that the pendulum can’t easily be stopped.

Written by Hannah Valez. Infiniti Cars Auto Sales Chespeake