Are Falling Interest Rates Benefitting Car Buyers?
The sudden surge of COVID-19 patients forced an acceleration in the number of delinquent cases by borrowers with the lowest credit scores.
According to consumer reports, more than 7 million Americans have car loans that are unpaid for more than 90 days.
To battle this economic imbalance, car manufacturers have lowered rates and added extra offers to motivate customers to buy.
For instance, General Motors announced that they’ll be offering 0% interest auto loans with repayment terms up to 84 months.
They’ll also accept deferment requests up to 120 days depending on your FICO score.
Other manufacturers like Nissan, Ford, and Hyundai have also started offering similar deals.
As strange as it sounds, this is just the right time to buy a new car.
In most cases, you won’t even have to make payments until 4 months into the loan.
You can compare multiple quotes and negotiate even better rates as most manufacturers are eager to sell stockpiled vehicles.
As of March 2020, the general available rates were:
|FICO Score||APR on New Car Loan|
|Less than or equal to 449||20.11%|
|450 to 649||18.85%|
|650 to 699||11.89%|
|700 to 749||5.04%|
|750 and above||4.97%|
Can Borrowers With Auto Loans Refinance Now?
The average interest rates are already down with the possible chances of going even lower.
Even though lenders haven’t explicitly mentioned any offers on refinancing, contacting a credit union, bank or a private lender and comparing quotes can help you decide.
That said, the primary requirement for a lower rate is your credit score.
If you have a good score, you can probably enjoy rates between 4% to 5%. If you had an auto loan with a higher rate and aren’t upside down on the car’s value, now is a good time to apply for refinancing.
The pandemic has led to a steep rise in lost jobs and rising debts, but if you still have a stable income, a manageable debt-to-income ratio, and a good credit history, you can get a better rate.
However, note that while there may not be much of a difference in the monthly payments, you’ll save a lot on interest.
What Happens If Borrowers Encounter Difficulties Repaying Existing Loans?
Luckily, most lenders and manufacturers have stepped up to help borrowers during these critical times.
For instance, Ally Financial has offered customers 120 days of deferral on auto loans without any late fees. However, finance charges will still accrue on these accounts.
If you have an auto loan from Ford, you can contact their hotline and request a deferment.
They have also been said to make payment arrangements for specific cases.
As of now, most lenders have listed the measures on their websites and launched phone support or hotline numbers for quicker processing.
You can even connect with the loan representatives using emails or chat options and get enrolled without the need to visit their office.
These deferment options are available to all existing loan holders, and it is best that you connect with your lender immediately if you’re facing financial hardships.
Please be informed that if you don’t enroll manually, late payments will impact your score and accrue huge penalties.
Will Coronavirus Impact Auto Financing Going Forward?
With the lockdown in place, auto sales across the US have dropped substantially.
According to the latest reports by J.D. Power, new auto sales dropped by 40% in March 2020 compared to last year. They have also warned that 2020 auto sales figures might hit near-recession levels.
As per Cox Automotive, the second-quarter of 2020 is going to be a nightmare for car manufacturers.
While a lot is yet to be determined, economists have made it quite evident that a major recession is around the corner.
Automobile dealers are already rolling out numerous offers to keep the new cars moving.
At this rate, the later half of 2020 will see a sharp decline in rates. More and more lenders will come up with offers to balance their inventory, but the dip in income levels will also impact the outreach of these offers.
It isn’t yet clear as to how long this pandemic will be around and how much financial impact it will cause.
Based on the current scenario, the economists forecast a jittery second half of 2020.
Keep checking the market status and look out for new offers and packages that can help you manage your funds at this critical juncture.