For car buyers, four words mean the difference between going home in a new sedan or their old clunker: You Loan Is Approved

 

Buyers are hearing these words more often these days, spurred by a trillion-dollar government program that provides guarantees when those companies make auto loans at a quickening pace. And consumers are paying less to borrow. It’s a bit of good news for the auto industry where 2009 sales are hit a 30-year low of around 10 million automobiles sold.

 

December saw an uptick in auto loan approvals for consumers with average and above average credit as auto finance companies tried to clear out inventory.

 

N.A.D.A. has also quoted, used-car prices also have stabilized due to limited supply, making used-car loans more attractive to banks and we at Dealership Experts believe that this trend will continue.

 

It could take another year for banks to trust consumers enough to return to normal underwriting habits. It’s far from the freewheeling days of the credit boom of 2006, when U.S. car and light truck sales reached 16.5 million.

 

In the meantime those with good credit need apply.

 

Consumers with credit scores between 720 and 850 – can get a 36 month loan with an average monthly interest rate of 5.74% down from 6.65% a year ago. On a $20,000 car loan, that’s a saving of nearly $300 over three years.

 

This being said, the cost of borrowing has risen for people in the bottom credit tier. A consumer with a score of 500 to 589 has seen an average rate climb to 18.56% from 16.47% a year ago. That translates to an extra $751.68 over three years. Banks are still nervous about loaning money to risky borrowers due to the high rate of unemployment, foreclosures and late payment increases since the financial crisis began.

 

All being said, 2010 should be a positive year both automotive dealers, lenders and consumers as the wheels begin to roll in a positive direction.