In fact, 2012 promises to be such a strong year when it comes to new-vehicle sales that Automotive News predicts that these sales may increase by as much as seven per cent this year. The source of this rosy outlook is twofold: a settling economy and built-up consumer demand.  Specifically, the five reasons listed by Forbes are the following:

1. Low car loan interest rates
2. High trade-in values
3. Great leasing deals
4. Competitive pricing
5. Better-than-ever vehicles.

The auto financing sector seems to be the only financial sector that is showing signs of health. Earlier this week, S&P Indices and Experian both reported that default rates were increasing again in all areas, except auto financing.

Ford Motor Company has emerged from the financial downturn of the last few years. It has seen sustained growth in sales lower default rates. Earlier this month, the company announced a push to clean up its supply chain with new ethical and environmental sustainability initiatives. In reaction to the company’s stability, credit rating firm Fitch upgraded the Issuer Default Ratings for Ford and its finance subsidiary from ”BB” to ”BB+”, allowing both companies to borrow money at lower rates.

The news comes at a time when most creditors are tightening their lending policies because of large debt/income ratios and excessive risk. Car loan lenders have been pressured to improve their risk management strategies to rein in losses. This cycle usually causes the economy to slow down. Hopefully, not this time since the economy is already moving slower than a snail as it is.

Talk about being able to buy everything in one place, when you walk into the nearest Costco, you can pick up bulk food items, clothing, electronics and now a brand new General Motors vehicle.

Alright, it will not be that simple, but being a Costco member continues to give more perks. Beginning Nov. 1, members can take part in a new GM-Costco Auto Program partnership that offers special GM Preferred Pricing on the purchase or lease of any one of eight eligible Chevrolet and GMC trucks and SUVs. You can choose from the:

• Chevrolet Silverado
• Chevrolet Suburban
• Chevrolet Tahoe
• Chevrolet Traverse
• GMC Acadia
• GMC Sierra
• GMC Yukon and Yukon XL

The limited promo can be combined with existing rebates and dealer incentives and members also receive a $500 Costco Cash Card. In excess of 2,400 dealerships across are currently participating in program.  No word yet whether you will need a good credit auto loan to purchase one of these babies.

The biggest stumbling block to a bad credit car loan is the amount of income reported to the IRS. Self employed people may not keep their records accurately and accidentally under report their income on a yearly Schedule C. Without an accurate picture of your income, lenders may not see that you earn enough money to make your loan payments and deny your request on that basis. Bad credit car lenders usually require:

• Income of $1,500 to $1,800 per month minimum. Your business will have to show tax records of yearly profit after expenses (net profit) between $18,000 and $21,600.
• Another problem arises if monthly expenses are out of proportion to reported income. For example, if the income is $2,000 per month, but expenses are $1800, the debt to income ratio is unacceptable and the loan will be denied.

The bottom line is that if you need a car loan and you are self employed, you will have to go to great lengths to accurately report all of your income to the government.

On average the MSRP for a new imported car climbed to $31,536 in August, according to figures from the U.S. Bureau of Economic Analysis. Over the same period the average MSRP for a domestic made car was sitting at $23,922 a gap of $7,614.

The U.S. dollar dropped to its lowest point since WWII against the Japanese yen and was at a 17 month low against the euro in May. The weak dollar means that sending lower priced models, that carry a lower profit margin, does not make financial sense for automakers. Until the dollar makes a strong recovery the price gap may continue to grow. That could be good news for domestic automakers if they are able to offer cars with attractive auto loans for people with good credit. 

”It’s hard to envision significant improvements in delinquency rates this year given the sluggish economy and falling consumer sentiment,” ABA Chief Economist James Chessen said in a statement. While credit card delinquency fell to near 3% in the second quarter, 11 other categories did not fare as well. Most of those categories rose by a half a percentage point. Mortgage delinquencies stood near 5% for the quarter. 

The major issue is an unemployment rate that stands at 9.1%. Add the under-employment numbers in and as many as 20% of Americans are barely able to keep the lights on and the water running. The Federal government seems as inept as ever. It appears that a double dip recession or full blown depression could be looming.

To be clear, while all lending institutions have the right to add this to a loan contract, credit unions are notorious for the practice. Banks very rarely add a cross collateralization clause. Borrowers may not even be aware of the clause until they file bankruptcy and exempt a vehicle. They find out when the lender enforces the clause and someone shows up to take their ride. And as you know, it can be very hard to get another auto loan after foreclosure or repossession).  Phoenix bankruptcy attorney Diane Drain has noticed more enforcement of cross collateralization lately by credit unions and not banks. ”Credit unions will try to cross-collateralize everything,” Drain said.

This is another example of why you should always read every clause of every document that you sign. Even though the practice is legal, is seems to be an obvious way to get around the bankruptcy protection laws in this country.

• 10% of your score is determined by the types of loans that you have. That means that a person who has several loans…auto, student, and retail accounts…you can improve your score more easily.
• 10% is determined by the amount of available credit you have. So, multiple credit cards helps, as long as you do not use them.
• Even if you pay your balance in full and on time, you will always have a balance on your credit cards when they are reported to credit bureaus. If you need to raise your score for a home loan, avoid using credit cards at all times.
• 15% of your credit score is determined by the length of your credit accounts. You should never cancel a credit card.
• Group your credit applications. Repeat requests for credit can lower your score, but if you apply for multiple accounts all within 30 days, they look as one application to the credit bureaus.

Hopefully, these tips only cast a little bit of mud on the credit score issue.

• General Motors sales were up 18%
• Ford was up 11.2%
• Nissan was up 19.2%
• Hyundai was up 9.1%
• Chrysler grew by 31%
• Toyota was down 12.7%
• Honda fell 24.6%

Here are the top ten best selling vehicles in August

• Ford F-series
• Chevrolet Silverado
• Toyota Camry
• Nissan Altima
• Chevrolet Cruze
• Dodge Ram
• Hyundai Sonata
• Ford Escape
• Honda Accord
• Ford Fusion

As production numbers come back online for Honda and Toyota, their sales should increase. Hopefully, consumer confidence will continue to improve, thus increasing the sales of new cars and the number of car loans approved.

• The loan terms are generally shorter than you would like. Most zero percent deals are a three year loan term. That may make your monthly payments higher than you are comfortable with.
• Dealer’s are not as apt to haggle price if they are not going to make additional fees for arranging a loan. This could cost you a few thousand dollars.
• The zero percent deals can be a bit of a trap. Only the top 10% of credit scores are going to get approved, but once you are on the lot, you may find yourself feeling pressured to buy at less than desirable rates.

Zero percent auto loans always sound great, but may not be the best option for you. Shop around for financing before you go to a dealer’s lot, negotiate the price of the car before you ask about the zero percent deal, and weigh all of your options before signing anything. You may find that zero percent does not make sense for you.