USA
If the Federal Reserve decides to increase interest rates, as it suggested it would soon this week, experts say the US automotive industry could lose $22 billion in sales.
The prospect of rising interest rates has the automotive industry on edge. Consumers could also purchase 150,000 fewer new vehicles and 500,000 fewer used ones, experts said.
Those expected rate hikes are likely to happen at the end of the central bank's next policymaking meeting — and almost exactly two years after it slashed rates to zero in response to the emergence of a fast-spreading coronavirus that threatened to destabilize the entire financial system.
Tyson Jominy, vice president of data and analytics at the consumer intelligence company J.D. Power, said usually there is an automotive roadmap for when interest rates spike and decrease, but little precedent exists for a global pandemic and an auto supply-chain shortage. Wall Street has underscored concerns about rising interest rates and inflation.
J.D. Power estimates spiking interest rates would lead to a $15 billion loss in used vehicle sales and another $7 billion in losses on new vehicles.
Leasing may become a popular option for car buyers because that was the trend heading into pandemic, he said. Whereas in the past, car dealerships would have offered more incentives for consumers to buy vehicles, that probably would not be the case in today’s climate.
Automakers have halved the incentives they traditionally offer — to around $1,900 for the typical new vehicle in December, according to industry data.
Interest rates this year will be less favourable for vehicle buyers, particularly those with lower credit scores, Cox Automotive chief economist Jonathan Smoke wrote in a blog post Wednesday in response to the Federal Reserve's announcement.
Source: nbcnews.com
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