Fed Holds the Line on Rates
Central bank waiting to see what happens under Trump administration. Auto loan rates, meanwhile, are rising again.
Average auto loan rates are up this month after falling last autumn.
Pexels/Olia Danilevich
The Federal Reserve left interest rates unchanged in its first meeting of the year after a series of 2024 rate cuts.
Chairman Jerome Powell said the central bank currently has no plans for changes in the strong economy.
Though the Fed pointed out that inflation lingers despite its prior rate cuts, it pointed to healthy economic activity, stable, low unemployment, and a strong labor market as reasons to stay with the status quo for now.
But, it said, “The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate,” the Fed said in a statement after its meeting, referring to its goals of maximum employment balanced with a 2% long-term inflation rate.
The reference to uncertainty comes a little more than a week after President Donald Trump’s inauguration. Market watchers are waiting to see effects of Trump's trade tariffs that many believe could increase inflation.
Cox Automotive observed that auto loan rates, after dropping last year, turned in the opposite direction this month.
In the fourth quarter, loan rates on new vehicles fell by nearly a percentage point, and those for used vehicles dropped half a point, Cox said.
But, “The volume-weighted average new auto loan interest rate is up 61 basis points to 9.25% from a low of 8.64% in December,” said Cox Chief Economist Jonathan Smoke, who said the average new rate is still down 47 basis points year-over-year.
DIG DEEPER: Under-Water Auto Loans on the Rise
More Auto Finance
Dealerships Are Paying the Price for Extended Car Loans
Growing negative-equity scenarios mean such lengthy terms should be addressed in a forward-looking way to make them work for the dealer and the consumer down the road.
Read More →
Trade-Ins in Negative Equity Reach New Heights
As such trade-ins rise in frequency, so do monthly loan payment amounts and interest rates, according to second-quarter data compiled by Edmunds.
Read More →
Auto Credit Plentiful
June numbers show lenders are readily granting access, including to risky borrowers, as consumers leverage themselves to take on high prices.
Read More →
Automotive Consumers Sink Further in Debt
Most financing metrics hit records in the second quarter as more buyers locked themselves into long terms and high monthly payments.
Read More →
Porsche Financial Services Shifts Structure
After 36 years with Porsche, the Financial Services Chief Financial Officer Konrad Riedl is retiring, and the department is realigning its management structure.
Read More →
Tariffs Could Raise Insurance Premiums
As U.S. import tariffs affect repair costs, consumers might find it more affordable to replace a damaged vehicle, according to recent Insurify tariff analysis.
Read More →
Smaller Loans, Longer Terms
The youngest generation of car buyers is more likely to finance less expensive vehicles, more than half of generation Z consumers borrowing less than $25,000.
Read More →
New Cars a Tad More Affordable
May averages show that combined circumstances gave auto consumers slightly better buying power for the month, though average prices were up year-over-year.
Read More →
First-Quarter Sees Long Auto Loan Growth
Experian data show more consumers are tapping the method, along with refinancings, to afford buying. Meanwhile, subprime borrowers are getting more access.
Read More →
Mastering Credit Friction
In this video, Josh Krach explains how to turn credit friction into an advantage.
Read More →