Rising interest rates are less of a concern for Subaru dealers

Rising interest rates aren't a problem for the Subaru market, though buyers seem to be bringing more cash to deals, according to Subaru National Retailer Advisory Board Chairman Jeff Williams.

"Is it affecting customers buying cars?" Williams, a vice president at Williams Auto World, which owns Williams Subaru in Lansing, Mich., said of interest rate growth. "No. I don't think so."

The difference between a 3 percent and 5 percent interest rate "isn't that big of a deal" to a car purchase, he told Automotive News on Dec. 13, the day before the Federal Reserve upped its benchmark rate another half point.

The average new-vehicle loan carried a 5.2 percent interest rate during the third quarter, up from 4.1 percent a year earlier, according to Experian. The average used-vehicle loan rose to 9.3 percent from 8.1 percent during that time.

Subaru retailers are seeing both more cash purchases and larger down payments on new- and used-vehicle transactions, Williams said. He said his dealership has seen more cash buyers than he'd encountered in "quite some time," and described receiving many "big down payments" in the $20,000-$25,000 range.

Americans are "pretty flush with cash" right now, and customers are using it to avoid higher interest rates, he said.

But the market still included aggressive lenders willing to compete for business via interest rate, Williams said. "Banks don't make money by keeping the money in the vault," he said.

Williams said the nature of the Subaru customer had kept interest rates from being a problem.

"They buy a Subaru because of the value and the quality," he said, adding buyers typically keep their vehicle a long time. They're also educated and smart about their money, he said.

But Subaru customers aren't pairing their lengthy vehicle retention with longer-term loans, such as the 84-month terms that now appear in about a fifth of financed new-vehicle sales.

At other Williams Auto World stores that sell different brands, customers are seeking 72- and 84-month loans to reach a payment target, Williams said. But this isn't the case among his Subaru clientele, he said. Subaru consumers will buy a vehicle and finance it over three to five years, he said. He has four brands across three stores in the Lansing area: the Subaru store, a Hyundai store, and an Audi and VW shared campus. "We're not seeing a large increase in long-term financing," he said.