While Interest rates remain high, automakers are offering a fleet of new models with financing at 1.99% or less
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As per the latest Fed meeting, it doesn’t look like interest rates – including those for new-vehicle financing – will be coming down any time soon. Next to depreciation, car-loan interest is one of a motorist’s largest long-term ownership costs, with affordability being a key issue among potential new-vehicle buyers.
Car-loan rates from many lenders I checked are currently being quoted at around 6.0%-to-7.0% for those having average credit scores, which on a $50,000 vehicle over a period of five years with $5,000 down can total $8,463, according the Bankrate.com calculator.
But astute car shoppers can do much better. Automakers’ websites unearthed 27 model lines selling with discounted 0.0% financing for five- or six-year terms as incentives to help spur sales. Scoring a zero percent loan here would reduce the above-mentioned buyer’s loan payments by $141 per month. In addition, I found 45 more being offered with loans at .09%-1.99%, which can still keep a wad of cash in one’s coffers.
Some of the best automaker-subsidized financing deals – all of which are listed below – further include deferred payments and/or bonus cash thrown in to help sweeten a deal.
But cut-rate new-car loans come with a catch, which for some unfortunate new-vehicle shoppers can be a whopper.
That’s because the lowest financing rates, whether coming from a bank or an automaker’s financing division, are based on a given borrower’s creditworthiness. This is where the line “for qualified buyers” noted in new-car ads comes in to play.
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Applicants having stellar credit scores (and sufficient income to cover the payments) get the best deals, including the aforementioned 0.0% promotions. Lenders consider applicants having lower credit scores to be riskier than those having top ratings, which means they’ll typically be charged higher financing rates.
Lenders evaluate an applicant’s creditworthiness based in large part on his or her “FICO” score, which is created and curated by the Fair Issac Corp. FICO scores are largely based on a person’s payment history and outstanding loan/credit card balances, among other factors. They range from a rock bottom 300 to a maximum of 850. While standards can vary from one financing source to another, having a higher FICO score almost always means having a better chance of qualifying for a discounted interest rate.
According to FICO, top-tier borrowers are those who have a score of 740 and above, which would almost certainly qualify them for the lowest available car-loan rates. Those rated at 690-739 are considered second-tier, which may or make them eligible for low-rate loans, depending on the institution. Those having lower scores will be asked to pay what could be a considerably higher percentage. Those suffering the lowest credit scores may be denied a loan altogether.
One more thing: Automakers’ incentive programs often vary from one part of the country to another, usually to address local supply and demand factors. Shoppers should be sure to alternately consider taking a cash rebate if it’s especially rich, one doesn’t qualify for the promotional rate and/or extra cash is needed for a down payment. Check with automakers’ websites or local dealerships to check on what’s being offered locally.
Source: Automakers’ websites with zip code 60657 entered. Some promotional rates were not included because loan-length terms were not noted. See a local dealership for details and pre-qualification.
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