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With the average rate for a traditional five-year car loan around 7%, potential car buyers may feel they’re spinning their wheels.

But they’re not.

Plenty of traction can be made with good loan rates that are below 5%, and we’ve found some for you.

First, note that trends in auto loan rates are drifting upwards, in direct contrast to home mortgage rates. Average rates for a five-year new car loan shot up from 6.15% to 6.77%. Similarly, rates for a used car loan over the same time period rose from 6.92% to 7.15%. The rise in rates could be attributed to the normal ebbs and flows of the lending markets. But, auto dealers are beginning to report a surge in demand, especially now that a state tax deduction has been included in the recently-passed $787 billion stimulus package.

Plus, the Federal Reserve has been aggressively buying mortgage-backed securities in the open market, which has helped driven mortgage rates down. No such program are in place for car buyers.

But if you’re creative and know where to look, good deals under 6% for new and used cars are yours for the asking.

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Take Bank of America’s (Stock Quote: BOA) latest loan rate for a 48-month new car purchase – 4.54%. A $200 fee may apply to the loan, and you’ll need good credit, but at that rate, who’s complaining? Over at Chase Bank (Stock Quote: JPM), car buyers can get a 5.31% four-year loan for a new car, with a nice 0.25% discount for setting up an automatic debit payment plan from your bank account.

National City Bank (Stock Quote: NCC-PA) also has a decent deal – a 4.82% 48-month car loan rate, but you’ll have to borrow at least $15,000. And, National City will also sock you with a $150 loan fee. And, yes, auto loan APR’s under 4% are out there. Start with Washington, DC-based PenFed, which has a 3.99% APR for a 48-month new car loan. The minimum loan amount is $8,000 and you can only get the loan by applying online. But there are no points and no fees with the National City deal.

As always, when you’re doing your homework on auto loans, make sure you check your credit report first (almost all of the great deals out there right now are only available to good credit candidates), make sure you pre-qualify, and always find out the closing costs before hitting the auto dealer lots. You’ll also pay less if you stick to a new car loan of four-years-and-under, and don’t be afraid to buy a car that’s only one- or two-years-old. On average, you can save 10%-15% on such deals.

For more information on great car loan deals, visit

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