Speaking a day before the Federal Reserve's Open Market Committee was widely expected to raise interest rates, Patrick Manzi, senior economist for NADA, forecast "three or four" rate hikes this year, for a combined increase of 80 basis points, or 0.8 percentage point. He predicted rate hikes totaling another 60 basis points in 2019. On Wednesday, the Fed raised rates and said it plans two more rate hikes in 2018.
On Wednesday, the Fed announced a rate hike, and forecast two more in 2018.
The increases won't affect buyers with good or excellent credit scores, Manzi said, but the "marginal buyer" with poor credit "is going to have to take that walk over to the used-car lot."
That's not necessarily a bad thing, he added, noting a growing surplus of off-lease used vehicles.
But Jeff Parent, president of distributor Gulf States Toyota, warned that rising rates could have other negative impacts.
For months, he said, automakers' "go-to marketing proposition" has been 0 percent interest-rate incentives. "If that's taken out of their quiver, they're going to have to go to cash" incentives if they don't reduce production fast enough to keep inventories in line with slowing sales, Parent said.