Fed Rate Hikes Likely to Hurt Car Sales in 2018

Jan. 3, 2018
Expectations for more governmental interest-rate hikes are leading to the virtually unanimous view that car sales will drop again in 2018.

Jan. 3, 2018—Expectations for more governmental interest-rate hikes are leading to the virtually unanimous view that car sales will drop again in 2018, bloomberg.com recently noted.

The Federal Reserve forecasts three rate hikes in 2018, prompting skepticism about the potential for car sales.

“Consumers could face slightly higher costs for all their borrowing: credit-card balances, student loans, financing a house or a car,” noted Charlie Chesbrough, senior economist at Cox Automotive. “At the same time, higher rates drive up the cost to provide low-rate financing, which eats into profit margins and hurts the carmakers, as well.”

For consumers, rate hikes of course make it more expensive to take on new car leases or loans.

And, as noted by Cox’s chief economist, Jonathan Smoke, when rates increase, many consumers don’t have an option to pay more. He believes the higher rates have already led the automotive market to shift toward used-vehicle purchases.

Sponsored Recommendations

Learn how ADAS utilizes sensors such as radar, sonar, lidar and cameras to perceive the world around the vehicle, and either provide critical information to the driver or take...
Enhance your collision repair workflow with Autel’s IA900, a process-driven solution integrating precision alignment, bi-directional diagnostics, and ADAS calibration. Designed...
The Autel IA700 is a state-of-the-art and versatile wheel alignment pre-check and ADAS calibration system engineered for both in-shop and mobile applications...
Discover how the investment in an extended-height paint booth is a game-changer for most collision shops with this Free Guide.