Car Loan Rates Fall to Record Lows, Reports

By Michelle Krebs April 14, 2010

The average automobile finance rate dropped to 4.4 percent in March, its lowest since 2002 zero percent financing.JPGwhen began to track finance records. The fall was due hefty incentives offered in March that included zero-percent financing and were led by Toyota.

By comparison, the average interest rate for the industry was 5.8 percent in March 2009.

Indeed, of all brands, Toyota had the lowest average finance rate at 1.9 percent in March. In an effort to regain lost sales from January and February and renew consumer confidence in its products, Toyota offered the biggest incentives in its history in the U.S., according to's Total Cost of Incentives  (TCI) analysis for March.

"Low interest financing is compelling for consumers because those who qualify often enjoy greater savings than they would get from a cash-back offer," said Jessica Caldwell, Senior Analyst for "Low interest offers are also better for automakers, because they are less damaging to brand image and residual values."

Others among the lowest average interest were Mazda at 2.5 percent and Ford's Mercury division at 3.3 percent.

At the other end of the spectrum, Kia had the highest average interest rate in March at 7.1 percent. The Kia brand attracts higher credit risk customers.

Other finance trends for March include:

- Luxury automakers took the top eight spots in March for shortest average loan length.

- Among luxury brands, BMW had the highest average down payment at $13,614 and the shortest average loan term at 52.4 months.

- Mercedes-Benz buyers financed the highest average dollar amount at $40,737 and had the industry's highest average monthly payment at $827.

- Among non-luxury brands, Subaru, which is having yet-another record sales year, had the shortest average loan term at 60.9 months and highest average down payment at $3,911.

- Dodge had the industry's longest average loan term at 67.0 months. Chevrolet followed Dodge at 66.6 months and Hyundai and Kia both at 66.1 months.

- Toyota's Scion buyers financed the lowest average dollar amount at $18,978, and the lowest average monthly payment at $348.

Consumers can easily check whether they should take the cash back incentive or a low interest rate offer by plugging the numbers into the Low APR vs. Cash Back calculator at on's calculator. -- Michelle Krebs, Senior Analyst and Editor at Large



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