If you’re in the market for a new car, 2011 may be the best year to finance one.

Dealers are bending over backwards to move cars by offering low to no interest loans, praying they don’t have another year like 2010 when car sales were 28 percent below pre-recession levels.

I know -- what about all this talk about a turnaround in the auto industry? The reality is that despite some improvement in car sales in the U.S., the overall market is still hurting.

According to SmartMoney magazine, automakers keep churning out vehicles, dealers stock up so they can offer a wide selection to customers and then at the end of the year -- if they don’t sell -- they’re stuck with them. Sales are growing but they’re growing slowly and dealerships have been overstocked, which means more cars are sitting on lots for longer periods of time.

Toyota rates

SmartMoney says Toyota has been among the more aggressive with dealership financing, offering zero percent APR on the Camry, Corolla, Tundra and Yaris in select locations. A Toyota spokesman said “we want our customers back,” and added that “it’s no secret that we’ve had a rough year at Toyota” with its massive recalls and bad press over cars that killed their owners. Toyota reported a 24 percent percent increase in sales in 2010, following a dismal year brought on by the fatalities and recalls.

On the 2011 Toyota Camry sedan, with a base model price of about $20,000, consumers can get zero percent financing for up to 60 months at some dealers.

Put $2,000 down on a five-year loan (the average length of most auto loans) at 5.9 percent (the average APR on a car loan) and you'll pay $840 more in interest over the duration of the loan than a dealer-financed borrower who locks in 4.2 percent, and around $2,820 more than a buyer who scores a zero percent interest rate.

Low-risk proposition

Although it sounds like a losing proposition, SmartMoney says dealers actually assume little risk with these low and zero interest loans. The loss automakers incur is still less than they'd face from both the stockpiles of unsold inventory and the resulting investor angst. What's more, says SmartMoney, not all loans are offered at a loss to automakers. And, unlike homes, cars are easy to repossess and can be resold relatively quickly.

Paul Taylor, chief economist at the National Automobile Dealers Association, says that typically, cars are repossessed three to four months after a missed payment. Home foreclosures, on the other hand, can take a year to process. What's more, fewer borrowers are missing payments; year-over-year delinquency rate on car loans is down 28.4 percent and is expected to drop further this year, according to TransUnion.

SmartMoney says that limited risk profile on auto lending has also contributed to an increased appetite among investors for these loans. Last month, Canada's TD Bank announced a $6.3 billion acquisition of Chrysler Financial and in October, General Motors completed its $3.5 billion purchase of lender AmeriCredit Corp.

Proceed with caution

Still, dealers are proceeding cautiously. SmartMoney says they're lending mostly to prime borrowers with a FICO credit score of at least 700, saving their lowest interest rates of zero percent to two percent for borrowers with minimum credit scores of 730 to 750 (depending on the dealer).

Jack Nerad, executive market analyst at Kelley Blue Book, says buyers should read the fine print to make sure the dealer hasn't slipped in any add-ons, like an extended warranty or a fabric treatment, that add to the cost of your loan. It's one of the few ways dealers make money from low-interest lending.

On the plus side, zero percent offers are being offered for loans of up to five years. In the past, the best rates usually applied for up to three-year loans. And while some of the zero percent deals expire at the end of this month, experts say consumers can expect more of the same throughout 2011 since car sales aren't expected to return to pre-recession levels this year either.