| No Car Loan Down Payment? |
| By Credit Federal |
Published
10/17/2008
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Auto Loan
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Car Dealerships Demand Larger Car Loan Down Payments
Due to the fallout of the credit crisis caused by high risk, bad credit lending, loan approval standards have upgraded. Many car buyers are now having to come up with a larger cash downpayment.
According to Edmunds.com, last month's average down payment was $3,108, compared to $2,194 two years earlier. Last month holds the record as the highest average down payment since Edmunds began tracking six years ago.
Why has the auto loan downpayment average escalated? To reduce risk, lenders are scaling back the amount of the transaction price they'll finance.
Because banks are a lot tighter now, it's even more important for consumers to first get financing BEFORE stepping onto a car dealership, to help strengthen bargaining power. Declined loan value averages: In July the average loan covered 95% of the car's value, but in August it covered only 88%.
Competition is Key for Consumers Seeking the Best Deal. As major lenders restrict how much they will finance and demand better credit scores, consumers need to take advantage of competitive rates and easier approval of other auto loan resources, such as those found online.
GMAC is limiting what it will finance other than the vehicle purchase price. Accessories, sales taxes, extended warranties or remaining debt on a trade-in vehicles may not be finances. Also, borrowers need a credit score of 700 or higher.
Toyota Financial Services is also shying away from financing extras, as well as deals whereby it lended up to 110% of a new vehicle's price.
Chase Auto Finance started cutting back high-loan-to-value deals last year.
But this isn't all bad news for consumers... The tighter lending; although it forces buyers to have a bigger downpayment and better credit score, is harming automaker and car dealership sales. These sluggish sales can mean extra bargains for consumers who are able to get financing.
Apply for online car loan quotes.
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