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Car loans becoming easier to get
The lending market for vehicle loans has softened, helping to drive car sales. Some lenders are even courting subprime borrowers.
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Jeremy Hobson: The Federal Reserve kicks off a meeting today in Washington. And when policymakers come out with their statement at the end of the meeting tomorrow, everyone's going to be waiting to see if more economic stimulus is on the way. The economy hasn't been performing up to expectations recently in almost every category: Corporate earnings, consumer spending, jobs, housing, car sales...
Well actually, for some reason, car sales have been doing okay. And as Michigan Radio's Tracy Samilton reports, that's not so much because of what's happening at the dealerships. It's more about what's happening at the banks.
Tracy Samilton: When banks froze lending in late 2008, it threw a huge monkey wrench into the car selling business.
Debbie Crum is financing manager at Snethkamp Chrysler in Redford, Mich. She says even customers with spotless credit couldn't land a lease or loan. Today, credit has eased to the point that most applications are stamped: "approved."
Debbie Crum: Instead of finding a way not to buy the deal, they're finding a way to put a deal together.
And if you do have that spotless credit, the banks and the dealers really want your business. Michelle Krebs is an analyst with Edmunds.com.
Michelle Krebs: 0.9, 2.9 -- they're not uncommon rates.
Even the subprime car loan business is booming, says Krebs, although people with seriously dented credit scores will pay a premium -- up to 10 percent interest for a loan. And dealers say it's not a return to the bad old days of automatic rubber stamping. So sorry. No job? No loan.
I'm Tracy Samilton for Marketplace.
I agree with the author that car loans are now easier to get than before. This is not because of dealership only but banks are also playing a a major role in it. In the present scenario where most of the business are facing recession the car industry is booming. People are taking too much interest to buy a car and easy loan approval has made their path more clear.
It's great for the economy to see people getting loans again but going back to the days where those kinds of loans were just being rubber stamped should not be an option. That was the kind of activity that caused the great recession and got the whole world in this mess. It also led to many lawsuits that have yet to be resolved.
Car loans are also incredibly cheap! My credit union has 60 month loans for as little as 1.99% with no down payment, or any other hoops to jump through (like checking, direct deposit, etc.). It's really kind of crazy considering they pay 3% on a free checking account with no minimum balance requirement. What would Mr. Dubner have to say about that? That's freakin' freaky.
