How Hard Is It To Get A Car Loan These Days?

Having trouble getting a car loan? You’re not alone. “Gas at $4 a gallon changed the type of vehicles people buy. The credit crunch, however, has changed their ability to buy,” says a car dealer. Higher interest rates, higher down payments, fewer loans, and high aversion to dings on your credit report, this Kicking Tires post has more from the front lines about banks’ new level of pickiness when it comes to putting you in your next jalopy.

How Wall Street’s Woes Affect Car Shoppers [Kicking Tires] (Photo: Tengaport)

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  1. pixiegirl1 says:

    I think a big part of the problem is people want cars that cost more than what they can afford. Sure it would be nice to drive a $40-50,000 SUV but I don’t need too. I want a new car but I don’t *need* a new car. I will probably drive the one I have into the ground before I get a new car.

  2. Shadowman615 says:

    This sort of irks the hell out of me, because I’ve been patiently waiting (and driving my old Hyundai) until my wife is finished paying her car off before I buy a new one — which will be next year. So now I will have difficulties or end up having to pay more for less car because of other people’s mistakes.

  3. no.no.notorious says:

    yeah, loans SHOULD be more difficult to get. it’s a sliver of why the economy is the way it is today. people, and don’t pay back. most of our economy is based off of borrowed money, and it’s not a suprise that things are the way they are today.

    but, having stricter loan policies may hurt someone’s feelings because they wouldn’t be *qualified* to get one.

  4. Wonder how this shifts the lease vs. buy decision? I would imagine that leasing would be less risky for the sellers and perhaps more financially advantageous (in the form of lower total payments because of this lower risk) to the buyers than it has been historically. The article doesn’t mention this; anyone have any insight here?

    • DropBearCharlie says:

      @AtomicPlayboy: Leasing is risky right now too. The auto-finance companies recently have been taking huge hits because the cars they leased out aren’t worth as much as they had projected when the leases were finished.

      All those expensive SUV’s people leased that got 5mpg nobody wants in the used(or new) car market.

      News articles had been claiming that a lot of people have been rolling in previous loans into new car loans too making them completely underwater. I don’t understand how this could possibly be allowed.

      • johnva says:

        @DropBearCharlie: I agree. Those stupid “rollover” loans should be the first practice to go.

        I still don’t understand, at all, why people feel the need to get new cars so often. Making a car payment is a money sink. Having a paid-off car that will still run great for years to come is a HUGE savings. It just seems idiotic to me that people want to be continually in overwhelming consumer debt just to be able to drive a new car every few years, to the point that we’re willing to roll over loan balances and be underwater. A car is transportation. Everything else is secondary.

    • jpmoney says:

      @AtomicPlayboy: I wonder the same thing in regards to leasing.

      Normally the biggest pitfall for leasing is that you get no/little equity from the transaction and it is used to get too much car. But, can it make sense to lease now provided a few assumptions?

      First, you use it to get a car you could normally afford so your payments would be less.

      With newer hybrid-and-the-like technologies coming out all the time its difficult to know about long-term maintenance and such. Leasing can be used to remove that risk since you wont have to care about the car after X years. A new technology comes out in 3-5 years thats better? Go for it with less baggage?

      Which ties to the ability to negotiate/include preventative maintenance and such into the price as well. “Free” oil changes and other such work do add up and its in the dealer’s best interest to do them correctly.

      There are other reasons, but this is already a “tl;dr” post. Its an uphill battle but I can almost talk myself into it. I wonder how insurance rates are affected.

  5. Canino says:

    Maybe I’m not in the norm in my situation, but I bought a truck just last month and had no problem getting a very good rate taking into account my current credit rating, outstanding balances and financial situation, including being self-employed and unable to provide the kind of income documentation they like to see.

    I was approved by Carmax at an outrageous rate, and the Carmax guy suggested I call Capital One Auto Finance. Did it all online and was approved quickly for 25% more than I needed, no hassles at all, and a better rate than most of the used car rates I had researched.

    It was easier to get a car loan than I thought it would be. Easier by a long shot.

  6. papahoth says:

    Do they still give worse loans to minorities of equal credit rating?

  7. dssstrkl says:

    Well, I just got a car loan for a new car a couple of weeks ago. It was mostly due to having solid income and a good credit rating. It might have been a different story this week, but who knows?

  8. nt0xik8ed says:

    with high gas prices i got a great deal on a durango and they were more than happy to loan me money at a really good rate with no trade in. although i put $5k down and paid it off in 6 months.

  9. wcnghj says:

    Got one 2 months ago in about 25mins. 12k loan.

  10. balthisar says:

    I just got the easiest loan I’ve even gotten for a car two weeks ago. And I allowed the dealer to it, because they gave me the rate that I knew I could get. You don’t have to be rich to have an 800+ credit score. You don’t have to avoid credit cards, either.

  11. battra92 says:

    Got my car loan last year and the interest is okay but not the 2% that most of my older friends (with much longer credit histories) have. I have decent credit but at the time I bought it I hadn’t been at my job all that long.

    Though the loan is 1 year old and 60% paid off and will be paid down completely by February so I don’t have to worry too much longer.

  12. nogas2speed says:

    For those with decent credit, there will always be loans for you…lending is an on going business (it could be argued…the oldest profession, but I won’t go there,) and it will continue. For those with not so decent credit…2 words…DAVE RAMSEY…look it up!

  13. narf says:

    It’s not the basic loan that’s the problem … lenders will still lend to those with less than perfect credit. No, the problem is that so many have negative equity in their current ride that no responsible lender would want to tack it on their current loan.

    It’s not that big an issue to put a $15k loan against even an Aveo. It is an issue to put a $35k loan against one because you owe $40k on a one year old monster SUV that’s barely worth $20k.

  14. PageEris says:

    I got a loan for a used car in July…..had absolutely no problems
    getting it. Went through a local credit union and got a 5% rate on a 5
    year old car. That’s better than most normal banks are doing on new
    cars! It’s not difficult to get a good loan even with mediocre
    credit……just gotta know where to go to get it, or shop around for
    good rates.

    It did help that my score is 725 and my wife’s is 740, though.

  15. TheNerd says:

    I’m glad to see that they’re being more picky. With the economy the way it is, the last thing we need is more people getting into financially risky situations.

    Now we just need our local governments to step it up with the public transportation. Right, guys? …guys? [crickets in town hall]

  16. bagumpity says:

    Tip: Have the cash on hand to pay for the car, then negotiate with the finance guy to get the highest percentage rate possible. Yes, highest. I’m not insane.

    While negotiating, tell him that in return for half of the dealer reserve back in cash you’ll buy into the highest interest rate they can charge. Dealer reserve is the “kickback” the dealer gets for screwing you while negotiating financing. Think of it as their slice off the top of your loan’s interest. The finance guys also get a bit of social kickback in the form of admiration from co-workers when they screw a customer by maxing out a interest rate. So chances are, the guy will be more than willing to cut you a deal.

    OK, so you have this loan with a HOLY-CRAP interest rate. Why is that good? Well, first lots of manufacturers are already offering cash back if you finance through them. You can get as much as $1000 off that way. Second, you got a couple hundred back off the dealer reserve. And third, YOU NEVER INTENDED TO PAY ANY INTEREST IN THE FIRST PLACE. As soon as the payment book shows up in the mail, call up the finance company and ask for the payoff amount. Then send them a check for the full amount. (If your contract states that you have to maintain the loan for a certain time, pay all but fifty bucks off then make $1 payments until the loan period ends.) The bottom line is, no balance = no interest. You get half the kickback but don’t have to pay for it.

    Hopefully this made sense. Of course, you have to watch out for sleazy tactics like pre-pay penalties and a form of “loan” (can’t remember the name) where you agree up-front to pay an amount equal to the expected interest, in equal payments spread out over time. Make sure you read your contract carefully to find any small print that would prevent you from doing this.

    Obviously, this only works if you have the cash. But I highly recommend that anyway.

  17. ilves says:

    I just replaced my ten year old Camry after I was told it needed 2k of repairs. I didn’t have much of a problem getting a 12k loan for a 2 year old re-certified car from the dealership that I traded my old one to (I do have a good credit rating). This was actually my first car purchase on my own (I’m only 25), and I was in a hurry since I was closing the deal over lunch so I didn’t quibble too much over the rate they were giving me (I also wasn’t sure what was a good rate in terms of car loans). Anyway, I got a 9.5% rate, which, after I got home later that day, though was a little high so I started calling around. I got a 5.65 rate from BOFA so I actually switched the loan over the next day, saving myself a grand or so if I actually keep the car for the next 5 years.

    But anyway, the dealerships will screw you, but sales are also down so they are willing to make deals. I’d recommend talking to your bank/credit union before going into a bank to find out what kind of rates you could get.

    • balthisar says:

      @ilves: “But anyway, the dealerships will screw you, but sales are also down so they are willing to make deals. I’d recommend talking to your bank/credit union before going into a bank to find out what kind of rates you could get.”
      Here’s the experience I had. Years ago I bought my current daily driver through PeopleFirst, who was bought out by Capital One. I’d had a good experience with them, so I intended to use them again. Their rate was good enough, but I was looking for a vehicle with more than 75,000 miles, for which they recently stopped loaning money (75,000 miles is nothing these days). The PeopleFirst people have since started something called FirstAgain, who agreed to loan me a considerable sum of money at an excellent rate. Here’s where the dealer actually helped, and in a strange way. Because I was buying an Expedition, and no one’s buying Expeditions, they were in a hurry to move it off the lot. I let them know that I had financing covered by PeopleFirst, but that I’d need a day for the deposit, but let them know that I’d toss them that bone if they could match it. Well, what did they do? They got financing at Capital One matching the PeopleFirst rate, for a car that had over 75,000 miles. I know that Capital One pays a consideration to the dealer (my “tossing them a bone”).

      Long story short: the dealer got me a better rate at my first choice vendor, than I could have gotten myself! And at the same time, going outside of my first choice’s publish loan guidelines!

      I don’t know if they would have done the same for me if I were in the market for a Focus or an Escape Hybrid, though.

  18. LatherRinseRepeat says:

    If you have a good credit history and a steady job, it shouldn’t be that hard to get an auto loan. And as others have mentioned, car sales are down. So you might also be able to get a decent deal on the purchase price of a new car.

  19. Corporate_guy says:

    Buy new. I got an 09 corolla for $300 a month @ 2.9%. Don’t even look at used. I looked at a used one they had on the lot and because you get “normal” interest rates on used cars, the payments would have been $350 a month for way less. Used cars are basically a scam when they offer such low interest rates on new ones.

    • FLConsumer says:

      @Corporate_guy: Uh… depending on how long that lease is, the dealership isn’t doing you any favours with $300/mo on a Corolla, even if new.

    • TPS Reporter says:

      @Corporate_guy: Yeah, we bought a new 08 Corolla last year and not only was the interest rate better, but with the rebate being offered ($500) we got it for literally $500 more than an 07 they had on the lot with 20k miles on it. Even without the rebate it would have only been 1k more.

  20. Jevia says:

    I was rather surprised recently when buying a certified used car (3 years old with 12,700 miles) that the dealership gave me a better interest rate than my bank. Also, I bought the car in the last couple days of the month, when the dealership was eager to make its quota, so they knocked another $1,000 off the price and lowered the extended warranty price (which my husband insisted on buying). Our payment is still under $300 a month, which we can pay off without penalty.

  21. nybiker says:

    Advice request: My 2006 Nissan Maxima SE 3-year lease is up in March 2009. It has less than 12K miles right now (yeah, I am a social driver, since I use NYC bus/subways to/from work). For better or worse, I had planned on giving it back to them and getting a new car. Now, I am not so sure about that.
    What to do? And how to go about doing it? If I want buy it outright, what valuation do they go through to determine its value?
    Thanks very much.

  22. AtomikB says:

    I have a pretty crappy credit rating but just got a loan for a $7000 car at 5% from my credit union. I think a big factor is that I bought a car that I can actually afford to pay off, and that’s why they gave me a loan. The credit union would be right not to lend me $40,000 for a brand-new Lexus.

  23. benbell says:

    My credit rating is not too hot but between my wife’s and my income we were able to secure a 0.9% loan for 30k just this past weekend.

    Granted our incomes together are well above what we pay monthly, we do have some CC debt to take care of. I needed to get a car for my job and decided that if I will be driving my car for the next 7 years or so that I would pick up a nice car.

  24. AD8BC says:

    I bought my wife a used 2007 Ford Focus this past February, 9 months old and 16,000 miles, for $10,500 after trading in the old 2001 Saturn with 160,000 miles on it.

    We have excellent credit, but we only pay cash for cars as I don’t ever want to have a car loan again. It took me three times to explain that I didn’t want or need financing, it is so rare to pay cash for a car these days.

    I did the same thing when I bought my pickup truck two years ago. So I only get 15 MPG in it. But it’s paid for. Doesn’t hurt me in the least to fill it up.

  25. Anonymous says:

    I, unfortunately am part of a lot of Americans. I have average credit which I’ve been cleaning up for years instead of filing for bankrupcy. I’ve worked hard to pay off creditors and am slowing finding the light at the end of a long dark tunnel. I still cannot get a loan for a decent car tho. My credit score is close to 700 but still struggle trying to buy a good car with out the high rates.