Michigan Has Nation's Best Auto Loan Rates

By: Brian Johnson Email
By: Brian Johnson Email

You've seen the commercials, and you've heard the lines, but now an independent study suggests it might not be a bad time to buy a car-- especially in Michigan.

"Going back 20 years, I haven't seen interest rates this low and banks so ready to finance consumers," said John Badawi, the owner of Motorcars of Lansing.

According to a new national study by GoBankingRates.com, on average Michigan has the lowest auto loan rates in the country at 3.03 percent. The national average is 3.65 percent. Rhode Island is the most expensive state, at 5.11 percent.

The reason? A lot of it comes down to supply and demand. In Michigan car lot sizes are actually larger than in some states, and that's good for the purchaser.

"Car dealerships in the east, they don't have that type of facility to hold 600 vehicles because the price of land is a lot more expensive out there," said Badawi.

Instead the car dealerships ship sell and ship their extra cars west. More supply, means more competition for both dealers and banks, driving the prices down for consumers on both cars window stickers and loan interest rates.

"A car will only go down in value, so it's always best for the borrower to pay as little in interest as possible," said Casey Bond, GoBankingRates.com managing editor. "Even half a percentage point can add hundreds of dollars to the total cost of a vehicle -- money that person will never get back."

LAFCU is a local credit union that does lots of auto loans. Last month was their best July in eight years.

"People have kind of kicked us down for a long time you know, but I think Michigan is making a great comeback," said Kelli Ellsworth-Etchinson the Vice President of Community and Business Development at LAFCU. "The economy is definitely improving so people have a little bit more discretionary income to spend."

While some people have felt the economy pick up, federal interest rates have remained the same, which is also helping car sales.

"After the recession in 2008, most consumers' credit scores dropped, so now most banks and credit unions are competing with that lower credit rates. That means it's easier for that consumer with not-so-good-credit to get financed for a vehicle at a decent rate."

Right now high schools students are big buyers.

"Before they were stuck buying a $5-7,000 vehicle, now they are in the market and they are buying what they want at the payment that they want," said Badawi. "Getting a car loan is easier and cheaper with borrowers of all sorts of credit do to lower interest rates and longer terms."

To see the full results of the study by GoBankingRates.com click on the link below.

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