As auto loan interest rates climb, will car shoppers put off a purchase or jump in before the market overheats? Industry analysts believe consumers will be split — some will push ahead with a purchase, while others will postpone.
Interest rates on new-vehicle loans, which surged 17 percent on average from January to June, are expected to continue rising this year and for the next few years. The escalation is already making new-vehicle ownership prohibitively expensive for consumers in nonprime and subprime credit tiers, said Jeremy Acevedo, manager of industry analysis for Edmunds.
While consumers with subprime credit still can obtain financing, interest rate hikes are constraining affordability for borrowers over the life of their auto loans. Interest rates on new-vehicle loans reached a nine-year high last month, hitting 5.82 percent, compared with 4.96 percent the year earlier, according to Edmunds.
"As we're approaching 6 percent, that [purchase] window is closing," Acevedo said. "If you're going to make a bigger purchase, now is the time."