Auto loan rates continue their decline and auto sales increase. December is expected to be the highest volume car sales month since the cash for clunkers program ended.

Why are rates so low despite a 50% increase in foreclosures last year? Currently the government is guaranteeing these loan instruments to large private banks. If you don’t pay, the investors don’t lose their money, the government has given them a fail safe plan.

The bad news is this TALF, the government program that insures the auto loans to investors, ends in March. The program, launched in March 2009, stabilized the auto loan securities market that was on the verge of collapse. This has given the private banks almost a year of insured lending, allowing them to lend money cheaper. Once the program ends, it’s likely interest rates will go through the ceiling.