It appears that banks are tapping the brakes on easy car loan approval and tightening their lending rules.
Vehicle sales in the U.S. plummeted to a two-year low in March, and caution on the part of banks might be a contributing factor. Why are some lenders reeling in their auto loan approvals?
According to CNBC, “after an extended period of low rates and easy money” for auto loans, lenders are now tightening their standards because of rising auto loan delinquencies.
ValueWalk, a financial industry news site, reports that a recent Morgan Stanley Research report revealed that “subprime auto delinquencies are currently approaching crisis-era peak levels,” similar to the car loan default levels reached before the Great Recession.
Getting a great deal on a car loan
If you’re in the market for a new loan, this might be bad news. Still, there are ways to get the money you need to buy the car of your dreams.
Before you head to the car lot, check out “Don’t Take Out a Car Loan Before Reading This,” for tips on how to shop for a car loan, how to avoid common pitfalls and how to understand the actual cost of a car loan.
One thing to keep in mind is length of the loan. As Marilyn Lewis writes in “Need a Car Loan? Here’s How to Get the Best Deal“:
Getting fixated on monthly payments can blind you to the actual cost of your loan and how long it’ll take you to pay it off. Shorter loans are cheaper, even though the payments probably will be higher, because you’ll pay fewer fees and less interest. Longer loans often carry a higher interest rate.
You can shop for loans online, including in our Solutions Center.
What do you think of the rising delinquency rate in auto loans? Sound off below or on Facebook.