The U.S. Federal Reserve, after months of speculation, decided to raise its benchmark interest rate by a quarter of a percent, which will raise monthly auto rates marginally for consumers, Janet Yellen, chair of the Reserve’s board of governors, announced Wednesday.
This is only the second raise since the 2008 subprime mortgage collapse, and with unemployment lowering to pre-recession levels, economists speculate the rate will continue to increase over the next decade as a sign of the economy improving overall.
Consumers thinking about buying a car now or in two years time should consider jumping at the opportunity now Markus Brunnermeier, a Princeton economist, told the New York Times. A 2017 loan could be fully paid off in a few years and the interest rate would still be rising, he said.
At the same time, the monthly rate on a $25,000 loan will only increase by $3 a month — not exactly a price hike to lose sleep over Bankrate.com’s chief financial analyst Greg McBride, told CNBC.
The rate increase comes at a time when banks are tightening their books and moving away from subprime and high delinquency rates among those borrowers, Auto Finance News has previously reported. Yet, the prime segments of the industry continue to grow, according to data from Experian.
