Interest rates fall to record lows for most car loans, and credit is easier to obtain

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Most buyers can finance a new ride for less than they've ever paid before.

The average interest rate for a 48-month, new-car loan remains at 6.71% in our latest weekly survey of interest rates.

That's the lowest this rate has been since Interest.com and its print predecessors started tracking it back in 1985.

The average rate for a 60-month loan fell to 6.68%, the lowest it's been since tracking began in December 1998.

Major auto lenders have loans for borrowers with credit scores of 700 or better that cost far less than 7%.

The automakers have lots of discount financing available, too. We're seeing everything from 0% for up to 60 months on a Chevrolet Silverado pickup to 1.9% for up to 36 months on a Honda Accord.

It's certainly true that those loans are more difficult to get than they were before last October's financial crisis, and you'll almost certainly need a modest down payment.

But most dealers agree that the worst of the credit crunch is over, even for buyers with below-average credit scores.

According to Auto Loan Daily and CNW Research, the average FICO credit score needed to get an auto loan has dropped every month this year, down from January's 726 to about 707 in early August.

Leasing is definitely making a comeback as well, giving buyers another option to finance a new car or truck.

Here's what to expect from the three major sources of auto loans:

Auto financing companies affiliated with the car companies: You've got to use these lenders to take advantage of the discount loans you see in the television and newspaper ads.

Make no mistake about it. This is the cheapest way to finance a new car or truck, if you can qualify.

GMAC, for example, is offering 0% loans as long as 60 months, and even 72 months, on many Chrysler and General Motors models.

The cut-rate loans aren't quite as good on most import brands -- 3% or 4% are more the norm. But that's still a good first choice.

The auto financing companies also are more likely to back buyers with below-average credit, though at considerably higher rates.

GMAC began lending to borrowers with subprime credit (FICO scores below 620) again last spring, and Toyota sales executives say they've been pushing their finance company to make more credit available to buyers with lower credit scores.

Credit unions: If you're a member, you'll find better rates than at most banks and a greater willingness to extend credit to borrowers with lower credit scores.

Credit unions usually require the smallest down payments, and a few might even offer 100% financing -- something that's hard to get from banks or auto financing companies.

That's why credit-union financing has grown to account for almost one in three auto loans.

Commercial banks: They often have higher rates and tougher qualification standards than the auto financing companies and credit unions.

But banks certainly have the money to lend.

Automotive News says that JPMorgan Chase made more auto loans than anyone else during the first six months of the year.

Banks also have some attractive deals.

Think Mutual Bank, for example, is offering 24-month loans for 3.99%, 36-month loans for 4.09% and 60-month loans for 4.29%.

Bank of America will provide loans up to 60 months for 3.84% in most places while Chase Auto Financial, the market leader, offers loans for under 5% and will whack up to a half-point off its published rates if you have a checking account.

Our extensive database of auto loan rates is a good place to check and compare rates from dozens of local and national banks.

It's been impossible or prohibitively expensive to lease most cars and trucks over the past year.

The domestic carmakers virtually stopped doing lease deals, and the import brands often limited that financing option to a handful of models and customers with the best credit.

When GMAC dropped out of the leasing business last year, the percentage of new GM cars and trucks being leased plunged from 17% to about 1%.

But that may be about to change.

GM is now offering leases on some Chevrolet, Buick, GMC and Cadillac models through US Bank or GMAC.

Chrysler is back in the leasing business too, with deals on all 2010 Dodge, Chrysler and Jeep cars and trucks.

If you think leasing might still be a good option for you, our "5 questions to ask before leasing" can help you make sure.