Everyone is aware that interest rates are on the rise. What does that mean for customers? Should you buy one soon to avoid the increase, or look at cheaper vehicles?
There’s no reason to worry yet. Although it seems that rates are on the incline for 2017, it’s expected to be a gradual and modest rise.
The Chief Financial Analyst for Bankrate, Greg McBride, says although auto loan and interest rates are on the rise, the auto loan market is becoming extremely competitive, which is great for buyers.
That competition and lack of Federal Reserve activity seem to have kept 2016 rates low.
Federal Fund rates are a short-term interest rate that the Federal Reserve sets. However, when the economy took a fall in 2007 and 2008, so did interest rates. The Federal Reserve kept the economy moving with lower interest rates. Rates were at zero until the Feds bumped them up by a quarter in December 2015. The rates aren’t directly connected to customer rates. However, they’re a good indication of what’s to come.
Recently they gave rates another quarter point increase. They’re also indicating three additional quarter point raises for 2017. However, if the economy slows down, they may back away from that prediction. And if the economy picks up, the rates may also rise higher.
If you have an auto loan right now, you probably won’t see payment changes because most are at a fixed rate. However, if you are paying off massive credit card debts, you may notice a change because most credit debt is at a variable rate. And if your mortgage is at a variable rate, expect rising payments.
If you’re worried about auto loans matching that growth, we have good news. Economists say car loans will most likely not increase because of how competitive the market is. However, many expect the auto market to slow this year, which may lead to companies offering unbelievable deals and incentives to keep sales up.