SUSIE GHARIB: Some good news for car shoppers. Rates on auto loans have
plunged to historic lows, many in the mid-single digits. What’s more,
there’s been a significant improvement in the number of borrowers
qualifying for loans. And as Erika Miller reports, the improving access to
credit is helping to drive auto sales.
ALAN BASS: I think I got a great value. It’s an awesome car. I love
it and there’s nothing that I would do differently.
MILLER: Alan Bass is a happy man, zipping along the streets of
Manhattan in his new Ford Edge. What made his dream possible was a sharp
drop in auto loan rates compared to when he last looked three years ago.
BASS: 4.5 percent. Back then, it was like 24 percent.
MILLER: And unlike last time, he didn’t have to wait weeks for
BASS: Within 20 minutes, I was approved.
MILLER: Gary Flom, head of the Manhattan automobile company, says
he’s seeing an across-the-board credit thaw. At his dealership, loan
approvals are back to where they were before the financial crisis.
GARY FLOM, PRES & CEO, MANHATTAN AUTOMOBILE CO.: Just to give you an
indication, back in 2009, less than 70 percent of all applications that we
sent in were approved. And in 2011, over 80 percent of the applications
that we sent in are approved by the financial institutions.
MILLER: It helps that auto loan rates have plunged nationwide. The
average rate for a new car loan is 5.2 percent; 6.2 for used cars. But it’s
important to keep perspective. Although auto loan rates are at record low
levels, not everyone can qualify. And that’s keeping the dream of driving a
new car out of reach for many Americans.
GREGG McBRIDE, SR. FINANCIAL ANALYST, BANKRATE.COM: The rules of the
road are that you have to have good credit. You have to have proof of
income and you have to bring something to the closing table other than your
smiling face. Specifically, you are going to need money for a down payment.
MILLER: But there are other factors that could help rev up auto
sales. Employment has been improving. And there’s plenty of pent-up
demand, because the average age of cars and trucks on the road is now at a
record 10.8 years.
DAVID WHISTON, SR. EQUITY ANALYST, MORNINGSTAR: The consumer is tired
of being tired, so to speak, and people have been putting off getting that
new car for several years now and they want a new vehicle.
MILLER: For his part, Gary Flom is forecasting a 10 percent jump in
revenues this year.
FLOM: We are ordering more inventory in preparation for 2012 and the
consumer is coming back.
MILLER: And many of those consumers coming back are finding low
interest rates aren’t the only reason to trade up.
BASS: It’s amazing. It’s got all kinds of different features that I
never had before. The technology today is, like, completely different than
three or four years ago.
MILLER: Erika Miller, NIGHTLY BUSINESS REPORT, New York.