Automakers are desperate to lure buyers into showrooms. Despite this need, consumers with weak credit will find it difficult to obtain approval for a car loan. In fact, some car owners are handing over the keys when they can no longer make car payments. Even then, they're not completely out of the woods. Once the car is sold, the finance company files a judgment against the borrower for the balance owed after the sale of the car.

But the free market is continuously striking a balance: while auto-loan defaults have reached a 10-year high, some auction companies are seeing repossessions increase. Similar to the sub prime-loan crisis that is causing home foreclosures, auto lenders had relaxed their requirements for car buyers by stretching the buyers' loan payments for cars they couldn't afford. The financial distress is being felt by all, resulting in new car loan delinquencies.

Lenders have had to write off billions of dollars in defaulted car loans. After losing almost $8 billion over the last five quarters, GMAC (General Motor's financing arm and the country's largest auto-finance operator) received a $6 billion rescue package so that they could resume auto lending to a larger pool of car buyers at GM dealerships.

Things may look up, or down, based on your perspective. For those whose credit worthiness is squeaky clean, automakers will continue to offer rebates and deals to lure buyers. For those with poor credit, the On Time payment protection system equipped in some cars will remind them when a payment is due. A microprocessor technology is used to disable the car when payments are past due. For car dealers, this technology can be used to extend credit to a larger pool of customers, including those considered high credit risks. If you're in good credit standing, approval rates hover around 90%.

But people have been so battered by the economic crisis that they fear slipping into debt for any reason. Why purchase a new car when you don't know if you'll have a job tomorrow? The same people who are having trouble making their mortgage payments will have less money available to make their car payments. Unfortunately, auto dealers won't be able to answer whether consumers will actually spend their money or pay down their debt.

One bright spot for potential buyers is that car deals are plenty. Because GM's sales plunged to 41%, it's working hard to convince consumers to purchase a new car. Buyers will definitely see more of the zero-financing stickers or low-interest financing on some of the slower–selling cars.

To increase your chance of getting your loan approved, you can take the following steps:

- Save more in advance, so that you can increase your down payment and reduce the size of the loan.

- Check your credit scores and correct and errors on the credit reports.

- Plan to improve bad credit