What the Fed's interest rate hike means for car shoppers
The Federal Reserve's decision on Wednesday to increase interest rates means consumers will pay more for new- and used-car loans.
Car shoppers got bad news on Wednesday when the Federal Reserve decided to raise interest rates, again.
The rate hike of a quarter point came after a pause in rate increases in June. Policymakers also hinted at another increase to come this year.
Jessica Caldwell, an auto market analyst for Edmunds, said consumers will feel the impact of the Fed's decision while financing auto loans.
"You tell an average person that the average new vehicle payment is $736 and they're like, 'That's absolutely crazy. That's ludicrous,'" Caldwell said. "That's way higher than anyone expects. But that is the reality of the situation."
In the past year, average interest rates for new car loans jumped from 5.2 percent to 7.2 percent nationally. Rates for used car loans jumped from 8.3 percent to 11 percent.
In the Tampa-St.Petersburg-Clearwater metro area, interest rates surpassed the national average for new cars (7.4%) and used cars (11.2%).
While increases to interest rates are likely to impact auto loans across the board, Caldwell predicts the used-vehicle market will be hit the hardest.
"For the used market, it's a bit different," she said. "It feels the effect of what the Fund Rate does a bit quicker and a bit more profoundly."
By comparison, the world of new-vehicle financing should be better suited to offset rate hikes with subsidized loan programs offered by banks and new car promotions offered by dealerships, Caldwell said.
Gabriella Paul covers the stories of people living paycheck to paycheck in the greater Tampa Bay region for WUSF. She's also a Report for America corps member. Here’s how you can share your story with her.