Got a 3-year old car? Great trade-in deals available
Signs advertise new a and used car sales at the Glendale Mitsubishi car dealership on November 15, 2010 in Glendale, California. U.S. retail sales jumped 1.2 percent in October, the highest level in seven months, with car sales and car parts leading the way. Credit: Getty/Kevork Djansezian
SANTA MONICA, Calif. - Low interest rates and better trade-in values for used cars have put vehicle owners with 3-year-old cars in the drivers seat for a lower monthly car payment toward buying a new car.
According to Edmunds.com, a top online resource for automotive information, trade-in values for three-year-old cars are up 10.3 percent in October 2010 compared to October 2007, while interest rates on 60-month auto loans have declined from an average of 7.4 percent in October 2007 to 4.7 percent in October 2010.
"By taking advantage of these unusual market conditions, consumers who purchased cars three years ago may be able to get top dollar for their trade-in, lower their monthly payments and get a new car -- all at the same time," says Edmunds.com analyst Ivan Drury.
A consumer who has a five-year $25,000 car loan at the average interest rate in October 2007 would spend $4,985 in interest while the current average rate would generate an interest charge of just $3,101.
This reduces the monthly payment from $499.76 to $468.35. A consumer who qualifies for cut-rate financing could save more. At the 1.9 percent interest rate that is being widely offered by automakers today, a qualified buyer with a $25,000 car loan will spend just $1,226 in interest, bringing the monthly payment to $437.10 per month.
"It is a terrific time to sell a used car since they are in high demand right now," noted Edmunds.com analyst Joe Spina. "That is especially true for cars that are three years old and newer since they often qualify for automakers' certified pre-owned vehicle programs, making them quite valuable to dealers who can sell them for a premium after certifying them."
