We are informed by the Federal Reserve that the average interest rates on auto loans as charged by commercial banks for a term loan of four years was 5.87% as of November 2010, whereas the average rate of interest as charged by large auto finance companies was4.6%. Borrowers usually financed nearly $27,000.
Brief History of Auto Finance
The rates of interest of auto finance companies dropped considerably during the financial crises that the US faced during 2008-09. During the last quarter of 2009, the average interest rates on auto loans were as low as 3.47% because a declining market. The average rate of interest during 2005 was nearly six percent, but in 2006 again these fell rather quickly to 4.99%.
Most often banks have been charging a higher rate of interest, compared to those charged by auto finance companies. When the rates of interest charged by auto fiancé companies were the lowest, the commercial banks charged an average rate of 6.55 %, meaning they charges over three percent extra.
HSH is one of the firms that gathers and compares lending and mortgage data. It reveals that the average interest rates on auto loans in the US varied with cities. For example, in Los Angeles, the average rate of interest charged from a borrower having good credit score stood at 6.9 % in year 2010, but the rate prevailing in Cleveland at the same time for similar borrowers was 4.7 % The rates for other cities were in between the two.
Your Credit Score
As can easily be guesses, the average rate is calculated as the mean of low and high rates. Every borrower may not pay the same rate or an attractive rate. The rate charged often takes consideration of your credit rating. So, you should research to get not just the lowest rate but the best credit deal. On accepting a loan carrying higher rate of interest, payable in a shorter period means that the amount of interest paid by you on your monthly installment will be more but you’ll need to pay for fewer number of months. You should realize that on paying lower rate of interest lasting for more than five years, you’ll finally be paying more money. It is for you to find out the factual rates to assess how costly the loan is going to be for you.