The global pandemic has exacerbated pressures on individuals trying to keep up with their auto loan payments. With millions of people out of work around the world, payments-related concerns are being brought to bear. Despite countries gradually opening up their economies to commercial activity, the damage is already done. Consumer buying power has suffered immeasurably as a result of COVID-19, as demand for new and used cars continues to plummet. That being said, anyone looking to finance a new or used vehicle, or make good on existing auto loans is under pressure. To mitigate the effects of repayment stress factors, lenders have taken it upon themselves to ease the burden on auto loan borrowers. www.bestautoloans.com takes a look at the options available to customers applying for auto loans during COVID-19.
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Reach out to Your Auto Loan Lender
There are several options available to vehicle owners, notably waving late fees, or deferral of auto loan monthly payments. The specific options will vary from one lender to the next, but it is always a good idea for customers to talk to their lenders and request assistance. The coronavirus has had far-reaching effects on the travel and tourism industry, entertainment and leisure industry, automobile industry, and well beyond. While deferrals may certainly be an option, it must be borne in mind that repayment will need to be made at some point in the future, including any interest that has accrued on missed payments. Viewed in perspective, the overall auto loan payment will likely increase.
Of course, there is always the possibility of selling an upmarket vehicle and downsizing to a more affordable option. This will reduce the burden of the auto loan, and make the monthly payments more affordable. The dual strategies of downsizing and deferment are quite possibly the most effective ways to decrease the repayments on a monthly basis. When selling a vehicle, the best deals are always gained through private sellers, not through dealers. Private buyers will often pay top dollar for a vehicle that they want, while dealerships will always pay the low market price because they need to generate a profit off their purchases. The coronavirus pandemic has absolutely devastated the global economy, and now that states are opening up after months of lockdowns, new coronavirus infections are on the rise.
Heading into April 2020, unemployment numbers across the US skyrocketed, according to the Department of Labor. Swelling numbers of unemployment claims arose, and car owners were chief among them. New car sales and car leases cratered, owing to the precarious employment situation. Besides, the numbers also suggest that car buyers and folks looking to lease a vehicle are rapidly falling. Fortunately, lenders across the US and elsewhere started offering forbearance programs for borrowers. Auto loan lenders strongly advise against hiding your current status (employed or unemployed) since this may result in liens and judgments against you. Credit unions are a good place to start, since they usually present clients with multiple options. These include low-interest credit cards, zero-interest auto loans, and the ability to skip payments/defer payments.
What Unique Programs Are Available from Auto Lenders Since the Coronavirus Outbreak?
Payment deferrals of up to 4 months are available to select buyers of new vehicles, but several factors come into the reckoning. These include your credit score and a list of available assets. If you are seeking payment relief from auto loans, it’s best to apply as early as possible, not after you have missed your payments. While deferrals on lease repayments are often granted, interest on deferred amounts always needs to be repaid. Late fees are typically not applicable, although it is incumbent upon the borrower to check with each lender. Another important factor in the equation is your loan/value ratio. When the car is worth more than you owe on the car, you have bargaining power. Unfortunately, in a depressed market the value of new and used cars plummets, eroding away the value of positive equity.
In April 2020, new vehicle sales across the US dropped by 50%, year-on-year. This is bad news for automakers, but it can be good news for consumers looking for special deals. Options like 0% financing and long-term loan options are proving to be highly attractive to customers. While these options may appear enticing in respect of buying a new vehicle, there are caveats. For starters if you plan on trading in your vehicle within 36 – 48 months, then you won’t have the equity after several months’ worth of auto loan deferrals. Edmunds data shows that 0% financing auto loans for up to 7 years made up 26% of all automobiles purchased in April. Unfortunately, when you get approved for long-term loans, this may serve as an enticement to buy or lease a much more expensive (unaffordable) vehicle. This places undue stress on the borrower.
What Should You Know About Applying for Auto Loans?
Whatever loans you apply for, there are several important considerations. These include down payments, interest rates, loan terms and conditions, and the costs of the loan itself. The fine print of the loans is also an important factor to be considered, given that certain restrictions may be in effect. Some customers get pre-approved for loans which provides greater leverage for negotiating better rates. Soft credit pulls don’t affect credit scores, but hard credit pulls can ding your score and affect your ability to get approved for lower interest rates on auto loans.
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