Post crisis car finance, the new rules.
He that doesn’t adapt is doomed to die. That concept is thrown around in all walks of life. Car finance is no exception. Banks and car finance companies have had to adapt to the new circumstances in order to excite timid and scared consumers into buying a borrowing again. Why do we say new rules? And if there is a new way of getting car finance, how can we get in the driving seat and make it work for us?
According to many economists one of the factors of the current recession was a serious credit crisis. People were borrowing more than they could afford and more and more banks were using bad loans as securities that were not worth the electronic blips they were written on. People in general will still spend more than they can afford, borrow more than what they can pay back. In order to protect the credit system the government has set in new guidelines. Banks have set out more stringent credit risk assessments, making it harder for the average client to get car finance or any kind of finance for that matter.
What are the new rules of auto finance?
The new rules of auto finance are the new rules of finance in general. How long they will last is anybody’s guess but if you are to be successful in getting a decent car finance deal you must adapt, and quickly.
As we said above the credit crisis spelled out what many already knew, that the system was faulty and did not protect either the borrower or lenders from their own greed. The new rules of finance aim to make it harder to get a loan or finance unless you can afford to pay it back. Credit rating has become more important when looking for car finance and more stringent guidelines are followed when assessing the income / debt ratios of borrowers.
The interesting part of these “new rules” is that both governments and banks want us to continue spending and borrowing. In fact many believe that the only way to get out of this recession is to BUY our way out. The idea is that capitalism needs consumers to continue buying for the economy to have a fighting chance. Of course this is mighty difficult when government and banks have increased the difficulty of getting car finance. For this reason the government has lowered the interest rates, invested in banks and even insured the loans banks provide. This has created a marketplace for car finance that has rarely been so attractive. Interest rates are at a record law. The only problem is that to qualify for these loans has become much harder. In our current economy having great credit rating has become much more important. In fact if you do have the right income and credit score you can apply for auto finance that has never been so cheap.
You could even refinance your car loan with current interest rates and save yourself a small fortune. Be smart and adapt to the new rules of car finance.