SOUTHFIELD, Mich.–The country’s auto dealers are being told low incentives, credit union popularity and delayed purchases are all expected to influence consumer demand.
“Rising interest rates should crimp consumer demand—starting with the most credit-challenged borrowers — but experts say other current factors hurt affordability more than interest rates,” reported Wards Auto Dealer. “Those include the ongoing new-vehicle shortage, low manufacturer incentives, low dealer discounting and the shift to bigger, more expensive trucks.”
Among the trends the publication said deserve attention are:
- Low Incentives. “Incentives are way down on average, but there are some low-rate incentives in the market, often tied to shorter loan terms,” Wards Auto Dealer reported. “Edmunds says some well-qualified consumers are taking on higher monthly payments in return for lower-subsidized rates that save money on interest.”
- Credit Union Popularity. “Some buyers (and dealers) are switching to credit unions for financing,” the publication said. “Credit unions have a lower cost of funds than more highly regulated banks and captive finance companies, so they often can offer lower interest rates.”
- Delayed Purchases. “Some shoppers postpone vehicle purchases keeping and repairing current cars and trucks.
Taking a Bite
Wards Auto Dealer further reported that rising interest rates “sooner or later” will be taking a bite out of sales, especially in subprime.
Tyson Jominy, vice president-data and analytics with J.D. Power, told Wards that from September 2019 to September 2022, the average monthly new-vehicle payment was up roughly $150 per month, to about $700. Of that amount, he told the publication only about $20 is directly attributable to interest rates.
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