Today's interest rate hike won't affect car buyers much
The US auto industry performed well for the last couple years of low interest rates, including a strong showing in 2014. This year has been even better thanks to cheap gas, and is poised to set a new sales record. According to Tom Webb, chief economist at Cox Automotive, these good times should continue, even with higher interest. "Lenders will keep lending and investors will continue to find that the auto loan market provides attractive yields with little risk," he predicts.
According to Reuters, the Fed suggested that it might gradually increase the rates further in 2016. If this happens, vehicle shoppers should still be able to find attractive financing deals. "Even after several rate hikes, the cost of funds will remain exceptionally low and captive lenders won't find it overly expensive to buy rates down to today's attractive zero percent offers," Webb said.
The long period of low rates helped the industry, and the danger now could be how people react to these financial changes. "Rising interests rates will negatively affect home values, and that, in turn, will negatively affect individuals' perception of their own financial health," said Jack Nerad, executive editorial director and analyst at Kelley Blue Book. He doesn't believe this small adjustment spells doom, but "it could signal we are nearing or have reached a peak," he said.
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