How the Fed’s rate hike could impact your next car purchase


DENVER — Coloradans are already feeling the pressure of higher prices at gas pumps and grocery stores. Now the auto industry could be affected, making it more expensive for people to buy a car.

“The basic economics is that the higher interest rate will make auto financing higher, more expensive for the consumer,” said Tim Jackson, president and CEO of the Colorado Automobile Dealers Association.

Last week, the Federal Reserve raised its benchmark interest rate by a quarter point in a bid to pull the reins on inflation.

For the new-car market, Jackson says the price difference shouldn’t be dramatic.

“We’ve heard about $1-$3 a month, it really depends on the price of the car,” Jackson said.

With strong demand for new cars but low inventory, it could be months before an interest rate hike catches up.

“It will take some time for any increase in interest rates to really stabilize the other issue so they can meet in the middle,” Jackson said.

While a slight increase in rates doesn’t have a big impact on a buyer’s monthly payment, some used car lots struggle to attract people to the lot.

Michael Auto Sales managing director Brook Senbeta says the real impact of the rate increase will be on cash-strapped people who don’t have enough money for a down payment to reduce the overall cost of the job. ready.

“The rate increase challenges the low-income, low-credit section of the population that moves them to a subprime lender,” Senbeta said.

With subprime lenders, people could end up paying up to 21% interest to finance a car.

“I understand the feds try to stop people from buying things, but when it comes to a car, you know, it’s basically your daily need to get to work,” Senbeta said. .

The Fed has signaled up to six additional increases this year. Until then, the higher prices being felt now could have a bigger effect than the first rate hike.


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