The New World of Auto Financing

The change in the credit environment and the economy has hit the auto financing world just as hard as the mortgage and investment worlds. Bid farewell to deals where low interest rates and no money down were options. While auto financing is tougher than it was a few months ago, it's still possible to finance a new or gently used vehicle.

So what does the new world of auto financing look like?

For good credit borrowers, the auto financing world looks like it always has. There are good deals and favorable terms. Some interest rates are as low as 0 percent. Bad credit borrowers, however, are being charged rates as high as 16 percent. And what is considered a a good credit score, national average of 720, is paying an average of 6.68 percent.

Down payments have made a come back unless you have a credit score above 700. Last year you could finance a car with no money down with a score of 650, so requirements are up about 50 points in this economy. Average credit borrowers are being asked for anywhere from 5 to 20 percent as a cash down payment. And one more thing, say goodbye to the 5-year financing option. It seems to be fading away like the no money down loans.

If you have good credit, the auto financing world has the same horizon. If you're a bad credit borrower, however, the sun is setting and the night is dark.

Kristie Lorette is a freelance writer and marketing consultant that specializes in personal finance. She is also the editor of The Mortgage & Credit Diva, a blog devoted to mortgage and personal finance tips, tricks, and advice for consumers.