The Auto Writer

Cadillac CTS Coupe

2009 was a rough year for the auto industry with sales falling some months to lows not seen in more than 50 years. Job loss and tightening credit conspired to drive down sales with some relief finally coming as the year came to a close.

Tightened Credit

Though unemployment and under-employment have been high, a number of consumers with good credit who were in a position to buy a car found that they were shut out of the market. Lenders had raised credit score requirements significantly, responding to government pressure as well as a rash of bad loans mostly in the housing sector.

In the Feb. 22, 2010 issue of “Automotive News,” Michael Maroone, chief operating officer for the largest dealer chain in the country, AutoNation, said that credit became more widely available beginning in the fourth quarter of 2009. Lenders began to extend more loans to dealers as well as to consumers including people with weak credit histories.

Savvy Consumers

Although lenders are credited with loosening their purse strings, consumers have done their part too by tackling debt and arriving at dealer showrooms ready to bargain and with a down payment in hand. Car shoppers with sketchy or damaged credit probably won’t get approved for an auto loan, but consumers who are working and can put down a significant amount of money are able to drive away in a new car.

Car shoppers are also finding support through government websites offering assistance on how to shop for a new car. In the city of New York, the Department of Consumer Affairs—Office of Financial Empowerment—offers consumers tips about auto loans.

Specifically, the department advises car shoppers to do three things: compare loan interest rates, make sure that they have final approval for an auto loan, and to be on guard for loan stacking. A pre-approved loan is not good enough as the terms of the contract can change. Loan stacking involves the practice of paying off the loan on your old car while getting an auto loan on a new one. In this example your loan covers the cost of the new car and takes care of your remaining payments on your old car minus its trade in value.

Buyers Market

The auto market is still tilted in the consumer’s favor, but not as sharply as it was early last year when dealers were eager to slash inventories, placing thousands of dollars on the hoods of slow-selling models. If you are in the market to buy a new car, do your homework by visiting sites such as Edmunds and Kelley Blue Book to gauge what you can expect to pay for your new ride.

It isn’t enough to get approved for an auto loan: you want to drive away from the dealership after securing the best price and financing deal possible.

Photo Credit: GM Corp.