Interest Rates At Record Seven-Year Low ↘️
As the pandemic pushed the 10-year Treasury note to an all-time low and the Fed slashed the federal funds rate, interest rates for consumer loans also fell, creating money-saving opportunities for smart buyers. Already low used car loan interest rates dipped to the lowest we've seen in almost seven years. But don't expect the savings to last forever.
"Consumers who purchased a car in May got to take advantage of some of the best deals we've ever seen, thanks to a combination of Memorial Day weekend sales and generous incentives offered by automakers to spur demand during the pandemic," said Edmunds executive director of insights Jessica Caldwell. "Even with 0% finance deals down slightly, more car shoppers got better financing rates than usual." This was actually attributed to a large portion of consumers electing to purchase a less expensive used car v.s a new car. Consumer demand for less expensive vehicles and historically low used car loans combined to create some of the best deals seen since the 2008 Financial Crisis.
According to Edmunds, the average car finance rate came in at just 4% in May 2020—the lowest since August 2013. For comparison's sake, the average buyer borrowed at 4.3% in April and 6.1% in May 2019. This is also the third-lowest rate the publication has seen since it started keeping track back in 2002. Does this mean that now is the time to secure a used car loan? Click Here to see if you qualify for a used car loan through CARite!
No doubt keeping the average down is the high proportion of deals inked at 0% APR. Twenty-four percent of all new cars financed last month were purchased with no interest, a slight dip from 25.8 percent in the month prior. However, the percentage of sub-3% used car loans jumped from 41.5 percent in April to 47 percent in May.
Naturally, with record-low rates, consumers have little motivation to pay off their Used Car Loans quickly. The average loan term length for a car financed in May 2020 was a whopping 71.4 months. This marks an all-time high second only to April 2020, which saw buyers taking out loans averaging 73.4 months. But with these low rates how do you blame them?
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