Like buying a home, auto loans rates fluctuate based on market conditions. When cars aren’t selling very well, auto loan providers will drop rates in an effort to reduce the lull. When cars are selling well, they’ll raise the rates to a point at which the market can bear .

Also, just like any other type of loan, auto loans rates are credit dependent, whereas having better credit will assure you a lower rate. If you have a credit score above 700, it’s entirely possible that you might be able to secure a loan well under the market average, and in some cases, as low as 0% when using the dealer’s finance company.

It’s not unheard of to see rates in the 2-3% range either.

On the other hand, having a credit rate below 700 will place you in the medium to high risk category, where you can expect to pay 8% at a minimum, and in some cases, as high as 15-20%. If you get a bad credit auto loan, usually necessary with credit scores in the low 600′s or below, many companies will try to kill you with interest rates. In this case, you are better off trying to get a co-signer or putting money down to lower your rates, if possible.

Most dealer finance companies, at least those of the major car manufacturers, like to see a credit score of at least 680 before offering a loan; anything less than that and you’ll be forced to procure your own financing. There are many online companies that will provide financing, but you have to read the fine print to make sure that there aren’t any pre-payment fees, which would penalize you if you sought to refinance down the road.

Still, because of the struggling economy, auto loans rates are near the lowest they’ve ever been, so there really isn’t a better time to buy than now. The best way to ensure a lower rate is by making sure you don’t have any outstanding collections, and that your credit cards and other loans are not maxed out. The lower your balances are, the better chance you have of getting approved. Even when you do get approved, you’ll be given a maximum loan value. The only way to buy a more expensive car is to put money down to cover the difference. This also includes add-ons, like warranties and sports packages.