Everyone who has tried to purchase a new car in the last year and a half knows that it hasn’t been easy. The only consumers who qualified without any trouble were those who had near-perfect credit histories. For everyone else, obtaining financing was a struggle – whether you were trying to get financed through the dealership or with your financing institution. The good news is that at long last things are starting to improve.

What Went Wrong

The asset-backed securities market provides lending money. The lenders package these loans together and sell them to investors. More loans can be extended to consumers from the cash raised in these sales. Just as it always has, the financing pendulum swings back and forth. When lenders get burned, they tighten up more than is reasonable. It’s true that consumers were getting loans they couldn’t afford – both for cars and homes. It was too easy to borrow. Everybody could tell you that terms like no down payments and qualifying based on stated income would result in more failed loans. When the market for mortgage loans crashed, the pool of funds for auto loans dried up too. Investors were suddenly much less willing to take a chance. The scarce loans went to consumers with super-prime credit – those with credit scores above 730. It became out of the question for anyone with credit problems or high credit card balances to get financing.

Where We Are Now

Two things have changed in recent months. The availability of funds has increased, with lenders and investors willing to make loans to consumers with less than perfect credit. Consumers’ expectations are different, and they’ve altered their financial habits in ways that will help them obtain financing.

Borrowing practices have eased up recently. The pendulum has reached its high point, stopped momentarily, and is now headed back the other direction. Lenders are once more offering loans to prime and near-prime consumers – those with credit scores between 620 and 730. They are also considering car shoppers who have income, but also have a foreclosure on their record.

Car buyers, too, are responsible for their renewed ability to get a car loan. They’re doing what it takes to qualify, and their expectations are more realistic. They’re working on their credit scores, saving for a down payment and paying down their credit cards and other loans.

The easy credit of 2007 & 2008 is a thing of the past, though. Car shoppers with large balances on their trade-ins or poor credit won’t get financed easily. And a healthy down payment is a must. Most lenders will not allow customers to count rebates as downpayment funds, although GMAC allows it.

Auto dealers can sell more cars when they see their closing rates improve. This creates jobs, allowing more car shoppers to buy cars, houses and everything else. As long as borrowers keep making their payments on time, lending requirements will continue to ease. If only they would stop at a practical level. Many years worth of of data should show the optimum lending practices – those terms at which new loans are relatively high and loan failures are relatively low, maximizing profit. But everyone knows that the pendulum can’t easily be stopped.

Written by Hannah Valez. Cadillac Cars 2010 Honda Atlanta