Background

Since 2016 rates on car loans have increased, only falling a little this year. Last year, rates on car loans peaked to about 5%, however they have fallen under 4.75 percent, as reported by Bankrate.com.

End of July, the Feds cut the interest rates, but what does this mean for you, and for those with thoughts of purchasing vehicles?

Like rates on credit cards, the rate on car loans does not always move in line with the Fed, for example in 2016 it fell even after the Fed raised rates. This means that there may not be much of a difference, and if there is it will be very slight, and not felt today.

The rate cut lowers financing costs for car manufacturers and dealers. That means “you can be a little bit more aggressive in your negotiations,” reports Tendayi Kapfidze, the chief economist at LendingTree, an online loan marketplace.

He adds, “you might be able to negotiate a cheaper price on the actual car.”

The expected little or no change on car loans, raises the point of why many economists do not think that a single Fed rate cut will be enough to change consumers’ spending habits.

“The impact on the household budget of one rate cut is inconsequential,” Mr. McBride said. “It’s not like it’s going to unleash a flurry of consumer activity.” (New York Times)