A Rate Cut in Name Only
The Federal Reserve is set to wrap up its December monetary policy meeting today, possibly capping the two-day discussions with a half-point or three-quarter-point reduction in the fed funds rate. Either one of those moves would result in record low rates.
But will that help the auto finance sector? I doubt it. The reason people aren’t buying cars is because they hesitate to plunk down $20,000 at a time when the economy is so shaky. It doesn’t matter much if the interest rate is 6%, 3%, or 0.5%.
It seems like our industry is really caught between a rock and a hard place. Vehicle sales have been slowing for months, and even low interest — or no interest, for that matter — will reverse the trend. For auto financiers, specifically, it appears that we’ll just have to hang tight until things improve.
