While interest rates jumped at the end of 2008, the average new car loan amount dropped and buyers put down larger down payments, according to the Federal Reserve’s November Consumer Credit Statistical Release.
Consumers cut their spending as interest rates rose dramatically at the end of 2008. The average new car loan in November was $25,041, down $350 from October.
New car interest rates were up to an average of 6.43%, a huge jump from the third quarter 2008 average of 4.87%.
The LTV, or loan-to-value ratio, on the average new car loan rose 2 points, to 88, in November 2008. This means that the average car loan was for 88% of the value of the car financed. The average LTV in 2007 was 95%.
What this data means is that it got more difficult and more expensive to finance a new car. Buyers are having to put more money down. The days of $0 down are gone and probably won’t be back for a long time.
So when you go to buy a new car, expect that the dealer or lender will require a 10-20% down payment. If your credit score is low, you probably won’t be able to drive the car of your dreams, and you might have to settle for a less expensive model.