You'd suppose that interest rates for auto loans would be pretty much the same across the country for people with similar credit ratings buying the same kinds of vehicles, right?
But you'd be wrong.
It's amazing how much auto loans can vary from place to place and bank to bank.
Nationally, the variance in auto rates for a 60-month new-car loan is more than 7 points--from a low of 5.9% to a high of 13.3%. That's a difference of $2,172.36 in total payments on a $10,000 loan.
In Los Angeles, the average rate for a 60-month new-car loan is 8.74%, compared with a national average of 8.5%.
That ranks the Los Angeles Basin at a pretty poor 98th of 119 market areas in the United States.
And rates for used cars are even worse: L.A. ranks 107th in the nation for the rate on a 48-month loan to buy a 2-year-old used car.
The best market in the country is Chattanooga, Tenn., where the average rate for 60-month new-car loan is 7.66%. Wichita, Kan., has the best average used-car rate at 8.13%.
Las Vegas--where money seemingly is plentiful--is the worst market for both kinds of loans with a 9.59% average rate for new cars and 10.76% for used cars.
There are many reasons for the wide variance in rates. In Los Angeles, one of the factors appears to be the recent rash of bank mergers, which has lessened competition.
Additionally, so many cars are financed in the region every week that it is a seller's market: Financial institutions with car loans to sell don't have to discount their products to find customers.
Kenneth C. Wanek is president and chief executive of Rate.Net, which updates more than 100,000 interest rates weekly for 11,000 banks and credit unions nationwide. Rates and quality rankings for local institutions can be found at no cost at http://www.rate.net .
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Houston, Here We Come
In many ways, Southern California is king when it comes to cars. But you'd be better off in Houston or Washington if you're seeking financing for a new or used vehicle. Here's a comparison of auto loan rates in the 10 largest U.S. metropolitan areas, along with each city's rank nationally.
New-Car Loans, 60-Month Term
Market Rates Rank High Low Average Houston 10.00 6.90 7.97 11 Washington 9.00 7.25 8.06 16 Atlanta 8.90 6.95 8.21 37 Philadelphia 11.49 7.00 8.56 79 Chicago 9.75 7.74 8.57 81 Detroit 13.30 7.50 8.58 82 Dallas 9.75 7.25 8.60 84 New York 10.00 7.90 8.66 94 Los Angeles 11.50 6.00 8.74 98 Boston 10.00 7.74 8.78 100
Used-Car Loans, 48-Month Term
Market Rates Rank High Low Average Washington 9.50 7.25 8.28 3 Houston 12.00 6.90 8.50 14 Atlanta 10.25 7.25 8.95 50 Detroit 11.99 7.50 9.10 68 Chicago 10.75 7.75 9.20 79 Boston 11.50 7.74 9.39 97 Philadelphia 12.90 7.20 9.39 97 Los Angeles 14.00 7.45 9.66 107 Dallas 13.60 7.50 9.68 109 New York 13.00 7.90 10.15 117