LAS VEGAS — Lower benchmark interest rates set by the Federal Reserve are a positive for the auto industry, despite the implication that rate cuts are a sign that regulators are trying to get ahead of a looming downturn, said Chase Auto’s Chief Executive Mark O’Donovan.
“Clearly, it makes cars more affordable, and it makes the cost of dealers borrowing money more affordable,” O’Donovan said at the 2019 Auto Finance Summit. “Generally, it encourages consumer confidence because money is cheaper. If you look at this year, it’s been a net positive overall with the rate benchmark going down.”
The Federal Reserve has cut the benchmark interest rate twice this year — in July and September — for a total of 50 basis points. The fed is expected to cut the rate 25 basis points again today to 1.5% to 1.75%.
“[A potential rate cut] is a little bit of two scenarios is the way I look at,” O’Donovan said. “If the Fed is successful in its approach to [cut rates] to keep the economy moving forward as it has been — we’re positioned for that,” he said. “At the same time, as a business matter, if global trade or tariff talks or other things cause some negative sentiment in the market, we’re also prepared for that.”