The Federal Reserve on Wednesday raised interest rates for the third time this year and signaled it will raise the cost of borrowing again in December. Industry economists said it will not get better for consumers or the industry from here.
Affordability remains a concern despite finance sources continuing to tighten underwriting standards, according to the firm. Consumers, however, seem unfazed, with outstanding balances climbing to a new record high.
At a record 69.3 months, average new-vehicle finance terms have stretched 6.8% from five years ago. The average amount financed and average monthly payment also registered new highs.
Reflecting the shift toward more creditworthy borrowers was the rise in average credit scores for both new- and used-vehicle loans. But the retreat from the high-risk tiers also comes during a quarter in which the average new-vehicle finance amount and monthly payment reached record highs.
The Federal Open Market Committee (FOMC) voted 9-1 on March 15 to raise the target range for the federal funds rate by a quarter percentage point to 0.75% to 1% — a move that was widely expected.
The magazine’s compliance guru has a few words for dealerships that have desk and sales managers computing and quoting payments.
RouteOne has entered the desking tool category with RouteOne Desking. The launch of the product, the company states, comes from requests from many of their customers.
With new-vehicle loan amounts and monthly payments rising to record highs during the fourth quarter, leasing’s share of the market grew to record levels. Data from Experian Automotive also showed that more consumers turned to the used-vehicle market in the end-of-year period.
The rise in new-vehicle prices continued in the second quarter, with more consumers turning toward the used market and leasing. Loan terms also continued to stretch.
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