The Average Interest Rates On Auto Loans In 2019
Buying a car becomes an important step, especially for those who live far from their place of work or whose work is connected with constant moving. To buy a new car for cash, not all American households have the opportunity, so many are counting on auto loans. For this reason, most of those who are going to buy a car this year are interested in the average interest rates for auto loans in 2019.
To understand this issue, as well as to learn about the options that are available this year, we have collected and analyzed information about auto loans in the United States. Read on to keep up with current interest rates on car loans.
As of April, the average interest rates on auto loans in 2019 in the US are 4.2%, with a loan for 60 months. However, this is a very average indicator, because under certain conditions and for individual consumers, the rates may differ significantly, depending on the loan term, condition and age of the car, as well as the credit rating and financial condition of the borrower. In general, the rates for auto loans in 2019 range from 3% to 10% per annum.
Average car loan rates depending on credit score
Borrowers with credit scores of 760 points and above can count on the lowest interest rates on auto loans. Consumers with excellent credit can get approval for a car loan with interest rates of 2-3%, which carry with them the least risk to lenders.
- For high-credit consumers, the average interest rates on auto loans in 2019 will be slightly lower than 4.2% for a period of 60 months, which borrowers with an average credit score a little over 720 can expect to receive.
- If your credit score is lower than this, then it needs to be improved so that you can get a chance for auto loan approval under these conditions. If you want to know how to improve your credit rating, you can find in our financial blog.
- An average credit rating of about 700 points makes it possible to count on the approval of a car loan with an interest rate of about 5% per annum. In doing so, lenders will take into account the value of the car, your liquid capital, as well as the overall financial condition.
When your credit score falls below 630 units, your credit is considered bad credit and lenders will be ready to credit you with auto loans only if they carefully consider your financial situation. They will study the ratio of your total debt to your income, the rate of use of the credit limit, and also study your credit history. In this case, you probably will not be able to rely on an interest rate less than 10% per annum if you get the approval of the auto loan.
Credit scores are calculated by credit bureaus by evaluating the history of loan payments, its duration, the presence of overdue payments, outstanding debt and other factors of your credit behavior throughout your credit history.
With credit estimates below 580 points, the average interest rates for auto loans in 2019 will be above 15% for the borrower and leave little chance of approval for a car loan. This state of credit tells lenders that the borrower has experienced a default or bankruptcy, made a lot of late payments, or was unable to pay its debts at all. For such borrowers, auto loans may cost several times and will have additional conditions if it can be approved at all.
Average interest rates depending on term
If we take the average interest rates on auto loans in 2019, the majority of financial institutions provide car loans for periods ranging from 24 to 72 months at interest rates ranging from 3.7% to 3.95%, when 60 months is the most common option of the term auto loan and the average duration is 68 months.
In rare exceptions, the period of a car loan can reach 84 months, however recently more and more often borrowers began to choose longer terms, which usually makes the monthly loan payments less, but at the same time the total loan amount becomes larger. This is especially true for consumers buying an older used car, the price of which does not justify the cost of a loan.
Terms of auto loans, longer than 60 months are usually used in cases of crediting purchases of expensive and new cars. It is quite justified, it is worthwhile just to look at example given further. If a new car worth 50 thousand dollars is to be taken at a loan of 4% per annum for 60 months, then the sum of the resulting interest rate will be $ 10,000. At the same time, with a car cost of $ 7,000, but an interest rate of 10% in its total amount, with a loan taken for the same period, will be 3,500. As you can see, in the first case, the consumer will pay 20% of the cost of a new car as an interest and in the second case, 50% of the value of the supported car, which by the time of full repayment of the auto loan will already lose most of its value.
The same applies to the extension of the loan period, when overpayment for the interest rate will increase for the use of a loan with each additional month, especially at high interest rates with an insufficiently high credit score.
Average rates for car loans by lender
The average interest rates can vary greatly depending on whether the bank, the credit union, or the automaker itself credits you. In most cases, car loans provide large banks, although the lowest interest rates in some cases can offer credit unions and automakers. You can learn more about the {auto loan with 0% interest rate} here.
If you meet the qualification requirements that we considered above, in most banks that offer car loans, you can get a car loan at an interest rate of 2 to 3%. If you do not meet the requirements for the borrower, for example, in terms of the credit level, then you can turn to other banks that offer less attractive interest rates but are willing to consider borrowers with bad credit. In this case, you are waiting for completely different numbers, which do not seem attractive to you, when the maximum interest rate can reach 25% per annum.
Usually, banks impose requirements on borrowers and on the conditions of auto loans when the maximum possible cost of a car, age and mileage of a car matters.
Credit unions mostly offer more flexible payment schedules, lower interest rates, and are also willing to consider lower minimum loans. At the same time, to take advantage of these pros, the borrower must be a member of a particular credit union for a certain time and make a certain amount of payments in order to be able to get a loan to buy a car. To become a member of one of the credit unions, in most cases, you have to be a resident of a particular locality or may be a member of a public or professional association.
Automakers
Many automakers, in order to increase the sales of their cars, are ready to provide financing for the purchase of their cars. By purchasing a new car from one of the automakers through certain dealerships, consumers have the opportunity to use a financing program that can offer car loans with an average of 0 to 0.9%, although This is not available to everyone, but they have their own characteristics, which we described in a separate article.
The difference between the interest rates for loans for new and used cars
Interest rates on loans for used cars are usually higher than on loans for new cars. This is associated with high risks for lenders when crediting purchases of used cars. Not all banks are willing to provide a loan for this, and those that are ready, most often have quite severe restrictions on age, mileage and technical condition of a supported car to approve a loan.
In addition to these restrictions, banks are ready to provide auto loans for the purchase of a supported car on fairly tough conditions and at a high interest rate of the loan. Even consumers with excellent credit are unlikely to find an auto loan offer for a used car with an interest rate of less than 4.2% APR.
For a used car, APR will be noticeably higher than the last one for auto loan for buying a new car. At the same time, the average loan amount for a used car will be significantly less than for a new one. The average loan amount will be respectively slightly more than $ 19,000 and more than $ 30,500, while you should not expect a loan period of more than 48 months when buying a used car on credit, if it will be approved.
Summarize
- Considering the issue of average interest rates on auto loans in 2019, you can see that auto lending interest rates in recent years are at a historic low, due to the global financial crisis that began in 2008. After this crisis, interest rates on all types of loans were reduced to stimulate the consumer market.
- If you are going to buy a car, then you must weigh the pros and cons to choose for yourself the most appropriate option of car loans, which you can safely afford, relying on your income and savings.
- You can choose different types of lenders improve your credit rating and use other options to make your car purchase more profitable. Check out any offers from car dealers and car makers in your area where you live. Now car companies are ready to offer financing for buying their cars themselves, which is why they have offers with lower interest rates.
- If you have any doubts regarding the choice of the option of buying a car, write to us to get advice from our financial experts who will help you understand your specific situation and leave no doubts about your choice.
Read our financial blog to learn more about how to manage your personal finances successfully.
