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Auto Loan Interest Rates Hit All-Time Low, Amounts Financed Meet 2008 Highs

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There's good news and bad news on the automotive front.

The good news is for auto shoppers: according to Experian Automotive, the average interest rate for U.S. car loans fell to 4.27 percent in the third quarter of 2013. That's the lowest rate Experian has recorded since it began tracking interest rates in 2008. 

Monthly payments are low, too. The average car note rang in at $458 in Q3 of 2013. That's only $6 higher than in Q3 of 2012. 

The bad news is for auto analysts and other born worriers: Experian says the average sum that car shoppers borrowed during Q3 of this year jumped to $26,719. That's considerably more than the $25,963 average recorded in Q3 of 2012. In fact, it's on par with 2008 highs. And we all know what happened in 2008, right?

Also worrisome: the length of the average auto loan has grown from 64 months last year to 65 months in Q3 of 2013. (Which helps explain why monthly payments stayed low, even as principals rose.) It sounds as if consumers might be stretching themselves a bit thin.

That said, it's comforting to note that subprime loans haven't been fueling 2013's booming auto sales. Among new-car shoppers, the average credit score for loan recipients has dropped just two points over the past year, now resting at 753. And for used-car buyers, credit scores stayed flat between Q3 of 2013 and Q3 of 2013, clocking in at 688.

As of September 30 of this year, 54.95 of the auto loan market consisted of nonprime, subprime, and deep subprime loans. That's not much more than Q3 of 2012, when nonprome, subprime, and deep subprime loans held 54.43 percent market share.

Experian's Melinda Zabritski thinks that everything's okay for now. She says that "The automotive lending market seems to have stabilized in Q3 2013. Subprime lending is still growing slightly, but is still well below prerecession levels in the highest risk segments, and its growth rate has slowed considerably. It seems as though lenders are approaching their ceiling for how much risk they are willing to take."  

Are you planning to take out an auto loan for a new or used vehicle? Are today's low rates making you consider borrowing more than you might've last year? Or does all this give you an uncomfortable sense of deja vu? Share your thoughts in the comments below.

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