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Better Performance for the Auto Industry in the Closing Months of 2009

By Sally Maison
Published: Sunday, January 10th, 2010

It is good to greet the New Year with a new car and all it takes is getting a loan approved. With the car industry showing improved performance during the third quarter of 2009, more people are expected to drive a new sedan instead of getting to work with their same old clunker. However, consumers are warned that it could take longer for the industry to return to its normal lending levels. Better credit scores and higher down payments are still what lenders look for to make sure that they do not see more defaults in 2010.

Better Performance for the Auto Industry in the Closing Months of 2009 Last year, the government initiated a stimulus program for the auto industry by providing a trillion-dollar aid for securing loans made by consumers. These helped banks, auto financing companies, and other creditors grant loans at a better pace to buyers. The improved performance of the auto industry also allowed consumers to borrow less even if not all of them have top-tier credit ratings. Analysts recorded the lowest interest rates for car loans since December 2008.

Experts earlier predicted that sales would hit a 30-year record low in December 2009, with gross sales estimated to be only around 10 million. However, things could turn around because of the improved car sales between July 2009 and September 2009.  They cite the “Cash for Clunkers” program as the main reason for this improvement.

Car sale figures for the last quarter of 2009 is not yet released, but analysts predict that there would be no less than 1 million cars and light trucks sold in December. If auto sales reached that high, it would be the best performance for the industry since August, when the “Cash for Clunkers” program was launched. This program provided $3 billion worth of economic incentives to car buyers, which explains the boom in sales last August.

However, experts warn consumers that auto lenders are far from letting their guards down. They said buyers with average or above-average credit scores were still charged with higher interest rates by car finance companies last December.

Specialists once again remind consumers that they need to work harder to improve their credit score if they want to get better interest rates. They said individuals who had a credit rating between 720 and 850 can easily get approved for a 36-month car loan with an average monthly interest rate of only 5.74 percent.

Meanwhile, the supply of used cars has become limited, causing their prices to become more stable. Consequently, used-car loans became more preferred by banks and other finance companies.

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