Is It Time To Get A Cheap Dealer-Financed Car Loan?

With banks continuing to stick to high (well, higher) lending standards, and car dealers eager to move inventory, now could be the right time to buy a new car and finance it through the dealer, according to SmartMoney. Rates are as low as zero percent, and . “nothing beats 0%,” says Paul Taylor, of the National Automobile Dealers Association.

SmartMoney runs the numbers and finds some good deals for consumers — though not necessarily for car dealers.

[T]he savings for consumers could be considerable. On the 2011 Toyota Camry sedan, with a base model price of about $20,000, consumers can get 0% financing for up to 60 months at some dealers. Put $2,000 down on a five-year loan (the average length of most auto loans) at 5.9% and you’ll shell out $840 more in interest over the duration of the loan than a dealer-financed borrower who locks in 4.2% and around $2,820 more than a buyer who scores a 0% interest rate. …

[D]ealers are offering interest rates that are 0% or close to it — for less than what it costs a financing arm to raise capital to lend. In this case, the dealer is not making money, and, because the automakers subsidize the loans to help dealers move cars that aren’t selling, the automakers are losing money.

Of course, buying a new car may not always be the best option, but if you are considering it, now may be a good time to start looking into it.

Car Dealers Lending More Money to More Buyers [SmartMoney.com]