Auto loan rates lowest in years

Here's a piece of good economic news: Auto loan rates are at their lowest in decades.

Of course, we think you're better off buying a car for cash. But, if you must borrow, surveys by Bankrate.com and Edmunds.com both found record-low rates. Plus, lenders seem to be looking more kindly on those with less-than-perfect credit.

• What rate can you get on an auto loan?

"I expect vehicle sales to steadily improve in part due to a thawing in the availability of auto loan credit," Mark Zandi, chief economist for Moody's Analytics, told Susan Tompor of the Detroit Free Press.

As Tompor wrote in another article:

For the past couple of years, the only thing you've heard about car loans was how hard they were to get. But now, bankers actually want to lend you money to buy some wheels. In fact, they are doing everything they can to drum up car loans -- including offering rates as low as 3% for people with good credit and lending to less-than-perfect customers.

Bankrate, which has been collecting data on auto rates for two decades, reported that the average rate for a four-year, new-car loan from a major bank averaged 6.21% last week, the lowest rate since it began keeping track. Some lenders were offering rates of 2.99%. Post continues after video.

Edmunds, which began tracking rates in 2002, reported that the overall rate for new-car loans in December averaged 4.16%. That takes into account subsidies from automakers.

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You may wonder how Bankrate's number could be a record low, since those of you with good credit have long gotten rates better than 6.21%. The answer is that the number is the average rate offered by banks to all borrowers, including those with bad credit scores, and doesn't include credit unions (which often offer lower rates) and dealer incentive rates. 

Edmunds has a chart showing the rates broken down by credit score and by banks and credit unions as of Dec. 10. That chart shows that the average rate for people with credit scores of 720-plus was 4.18% at credit unions and 4.29% at banks.

In contrast, the rate for those with credit scores between 630 and 669 was 8.4% at banks and 7.58% at credit unions.

• Estimate your credit score for free

The good news for those with lower credit scores is that more car loans are available to them.

"There definitely is a changed marketplace," Melinda Zabritski, director of automotive credit for the credit-reporting agency Experian, told Ronald Montoya of Edmunds. "We're seeing a year-over-year increase in the percentage of loans that are booked in the subprime space."

More from MSN Money:

• How and when to get a hot car deal
• 10 common car-buying mistakes
• The joys of a $5,000 used car
• Bad credit? How to buy a car anyway
• Hate haggling with auto salesmen? Don't
• 10 steps to the best car loan