DETROIT, May 24, 2022 /PRNewswire/ — With the Federal Reserve recently raising the interest rate for the first time since 2018, Automoblog has just released a new article to dive into the possible effects of these hikes on the already volatile auto loan industry.
Average auto loan rates reached their lowest point in six years in December of 2021 according to data from Statista, but rates have since increased. Automoblog states, “Nearly every industry will be affected in some way by the interest rate hike. But in industries like the automobile industry which depend on both a business and a consumer’s ability to borrow money, the effects could be especially significant.”
As the interest rate goes up, consumer borrowing rates will most likely go up with it. Supply chain shortages from the COVID-19 pandemic increased consumer demand, but a higher interest rate could cause that demand to decrease. If this is the case, dealers may have to respond by lowering prices for new and used vehicles.
While the first two hikes’ effects on the auto loan industry have been minimal, the Federal Reserve has announced that there are still five more increases coming in 2022.
The article also highlights some of the reasons that the Fed is raising the interest rate, including a rise in inflation, a healthier labor market, and a long-term historically low interest rate.
For more information on the auto loan industry, you can visit Automoblog here.
Automoblog is an automotive news site dedicated to providing drivers and car enthusiasts the latest information and tips in the automotive industry.