by Broderick Perkins
"L.A. is a great big freeway
Put a hundred down and buy a car
In a week, maybe two, they'll make you a star"
- Burt Bacharach, "Do You Know The Way to San Jose?"
It's a good time to buy a car - and help boost the economy.
The National Automobile Dealers Association (NADA) said the U.S. auto industry sold more than 910,000 vehicles units in the month of January 2012, an 11.2 percent increase from a year ago. The seasonally adjusted annual rate for car sales came in at 14.2 million, up from 12.6 million a year ago, due to a host of factors expected to continue this year, according to Paul Taylor, NADA chief economist.
• Revved-up demand. Until recently, crisis-level economic conditions in the U.S. and Europe and disaster in Japan depressed supplies of both new and used cars. That pushed up prices for buyers, but gave owners an incentive to sell and cash in on higher trade-in values.
• Gassed-up home prices. The housing recovery remains spotty, but a growing number of regions are enjoying home price stabilization, boosting consumer confidence and, in turn, boosting an increased interest in car shopping. Having a greater impact on the economy than the auto sector's manufacturing boost, the housing market accounts fro 40 percent of the Consumer Price Index.
"Stabilizing home prices will support stronger car and light truck sales over this year," Taylor said.
• Shiny new car options. General Motors, Ford, Chrysler and Volkswagen, heartened by the boost in consumer confidence, have been quick to launch new products that compete with those offered by other automakers. The excitement over styling, fuel efficiency and other options has driven more consumers to the showrooms, says Taylor.
"The interest in new cars also reflects the lack of used cars with low mileage. During the recession, 5 million cars didn't come into the marketplace as trade-ins," he added.
• Zoom, zoom credit. Just as lenders squeezed credit for home purchases, car loans have been tough to get, but that's changed - big time. With home financing still tight, lenders are looking elsewhere to make money and fast auto loans are getting the checkered flag.
"Interest rates on new car loans will remain historically low in 2012 and 2013, due in part to policy decisions by the Federal Reserve Board to keep rates low and the U.S. economy growing," Taylor said. "
"As a result, affordable credit will be widely available from more automaker finance companies offering low-interest and interest-free loans for up to 60 months," Taylor said.
Experian Automotive says lenders are charging U.S. car buyers the lowest interest rates in nearly a half decade. Rates averaged 4.52 percent for new car loans in the fourth quarter 2011, down from 4.84 percent a year earlier and the lowest since Experian began tracking the figure in 2008.
Shop around for the best auto loan rates
Informa Research Services reports average auto loan interest rates (combined credit unions and banks) are down an average of 0.81 percentage points from a year ago across all categories.
For the period from March, 2011 to Feb. 2012, here's how average rates have dropped for new and used (two-year old) auto loans, according to Informa.
• Four year new auto loans - 5.14 percent to 4.36 percent, down 0.78 percentage points.
• Five year new auto loan - 5.3 percent to 4.43 percent, down 0.87 percentage points.
• Four year used auto loan - 5.48 percent to 4.69 percent, down 0.79 percentage points.• Five year used auto loan - 5.33 percent to 4.53 percent, down .80 percentage points.
Credit unions are contributing to more competitive rates by offering rates that average 1.31 percent to 1.60 percentage points below rates charged by banks, according to Informa's statistics.
Unfortunately, troubles in Syria, Iran and other oil-producing regions could cause higher gasoline prices to put the brakes on sales.
"Of course whenever gasoline prices jump, a boost in sales of small and alternative fuel vehicles occurs," says Taylor.
"Many consumers think if they're going to buy SUVs or other light duty trucks, they had better do it now, with gas reasonably affordable," says Taylor.
At the national average of $3.61 a gallon on Feb. 24?
Perhaps in hindsight, should gas prices rise to what some say could be $5 a gallon, today's prices will be considered "reasonably affordable."
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