Variable Rate Auto Loans

Variable-rate auto loans, formerly rarely seen, are popping up at a few credit unions.

Rather than being subject to fluctuations in monthly payments, many drivers with variable term auto-loans may have their loan term lengthen should interest rates rise, and shortened should they fall.

Variable-rate auto  loans may make sense for some consumers if the spread between the fixed and variable rate is above 1%, says Jesse Toprak, executive director of edmunds.com. Otherwise the discount might not be worth the risk. And, he says, many institutions may limit variable-rate auto loans to customers with excellent credit.