[ad_1]
ROCHESTER — Buy that car while the money is still cheap.
The Federal Reserve has been raising interest rates over the past month as it continued an aggressive approach to inflation with the U.S. Bureau of Labor and Statistics reporting consumer price index increases of 8.5% in March and 8.8% in April.
While credit card debt, mortgage rates, and rent prices continue to rise; auto loans and appliance prices are still affordable for low-income and middle class households. And with the fast rise in the consumer price index – the largest jump since 1981 – household budgets are becoming tight due to a combination of inflation and raising interest rates.
However, auto loan rates, for now, are still relatively low.
“Auto loans are not increasing as fast as mortgage rates are increasing right now,” said Jacelly Cespedes, assistant economic professor at the University of Minnesota’s Carlson School of Management. “Auto loan rates just have not caught up with other rates right now but could in the next six months
Usually, Cespedes said, when the Federal Reserve raises its interest rates, that impacts interest rates for all loan products.
With auto loan rates remaining loan, auto dealerships are seeing many customers coming through their doors now looking to take advantage of these cost saving deals. Jake Fratzke, chief finance director of Penz Automotive Group in Rochester, said a large number of customers trying to get ahead of rising interest rates.
“What I’m seeing right now is almost all customers trying to get ahead of the rates rising,” Fratzke said. “It hasn’t slowed down business by any means. As customers know that the Federal Reserve is raising the rates, they’re trying to get ahead of that curve and get the vehicle that they’ve been talking about for the last few months or the last year.”
Theodore Tollefson / Post Bulletin
Even as customers are working to get ahead of rising auto loan rates, there is still a microchip shortage among vehicle manufactures that is delaying the manufacture and delivery of new vehicles they are ordering, Fratzke said.
Whenever customers do commit to the purchase of a new vehicle, Fratzke breaks down the reality to them that if the vehicle’s completed manufacture and delivery could be six to nine months out. There is a possibility that their loans for the purchase will rise if Federal Reserve raises interest rates again in that time frame.
“As we get closer to the end of 2022, that’s where you’re going to see your peak in these interest rates. It’s just a matter of what will those rates do by the end of the year as they continue to grow higher now,” Fratzke said. “I hate to say it, but rates rising really won’t have an impact on car sales at higher rates, again, it will probably push more sales as rates rise, consumers will try to get out of those higher rates as much as possible.”
On top of considering purchases of cars while the prices remain cool. Cespedes has been advising many households to focus on their budgeting for the year as she does not see inflation decreasing any time soon.
“Overall, I think that households need to go through their budgets and try to compensate for the negative effects of inflation. A first step is to look at their budget and try to find substitutes, or replacements to what they need and don’t need and start negotiating some of the bills,” said Cespedes.
[ad_2]
Source link
