With Americans planning to buy new or used cars in 2021, they might not witness dipping auto loan rates as drastically as the year before. However, the rock-bottom interest rates will still be on their side.
Statistics show that the average rate for 60-month new auto loans starts at 4.24 percent and has seen a drop to 4.18 per cent as of June 30. Similarly, the rates on 36-month used vehicles begin at 4.53 per cent and decline to around 4.49 per cent.
The Federal Reserve says that attempts are in progress to keep the rates borrower-friendly, which is most likely to continue through 2022. A banking expert says that a critical form of short-term borrowing, auto loans, see direct influences by benchmark interest rates, the federal funds rate. The experts added that the economic backdrop seems favourable with lower interest rates and tremendous competition among the lenders.
- There will be a Decline in the Rates:
COVID-19 crisis saw a rapid decline of 2020, and that’s how auto loan rates continue to come down the succeeding rates. Also, this trend is most likely to continue in the following months of 2021.
Amid the recovering economy, the Federal Reserve continues to keep low-interest rates.
- Scoring Lower Interest Rates by Focusing on the Credit Score:
The credit score is the critical determining factor when it comes to determining the rate of interest on a loan for both a new or used car. To be precise, today’s auto refinance rates– the higher ones are reserved for people who make their investments look riskier based on their credit profiles.
As per Experian data for 2021 first quarter of 2021, the average annual percentage rates on used and new loans were 21.07 per cent and 14.66 per cent.
To qualify for a competitive interest rate, make sure to improve your credit score. Also, ensure making timely payments and try keeping your credit utilization ratio low. You can also diversify your credit mix and monitor your report.
Know that a strong credit score helps in negotiating a better loan term with a lender.
- Shoppers Trouble Finding Low Inventory:
This year, a significant problem with car buyers is the lack of car inventory with dealers across the country. The global chip shortage continues to impact the supply and the availability of new cars.
The North American inventory was around 1.5 million vehicles at the end of May 2021 compared to 2.6 million at the end of May 2020. And, the National Automobile Dealers Association further projects the same to drop to 1.3 million by the end of July.
What’s even tricky is that the problem further compounds by increasing customer demand.
Chip shortages and bottlenecked manufacturing due to coronavirus continue impacting both new and used car rates. Consumers need patience, eyeing at the challenges to score better car purchasing deals.
If you intend to buy a used car, and refinancing is on your mind, preparing yourself for the research and flexibility is the key. Also, act quickly if you come across a vehicle with reasonable car rates.
After all, it’s about expanding your search radius amid the tight market.