Car industry faces latest hurdle as interest rates impact car loans

Impact of inflation on buying a car
Published: Jul. 29, 2022 at 7:56 PM EDT
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HARTFORD, Conn. (WFSB) - There is still a bit of a selection at Stephen Toyota in Bristol.

“I do have some inventory available, I have quite a few used cars available as well,” said Cody Gill, General Sales Manager of Stephen Toyota.

Although, it has been a little slower getting people to come through the lot.

“Interest has been a little slower, could be a little bit of the interest rates raised, could be folks trying to get away and enjoy vacation that they haven’t enjoyed in the last couple years, but it’s definitely been a little quieter this particular month,” Said Gill.

On Wednesday, the FED raised interest rates another .75%, Lifting the benchmark rate to a range of 2.25% and 2.5%.

The rate hikes have been hard to ignore on car loans.

“You’re seeing a difference of a point and a half, 2 points, depending on how long you’re taking the term out for and how much you’re looking to borrow. There’s no question, there’s been an uptick,” said Gill.

Chris Ball is an Associate Economics Professor at Quinnipiac University.

He says we are likely seeing the beginning of the impact now.

“You’ll see a drop in demand for new cars at first, and at the same time, they’re just coming over their supply chain problems. Getting microprocessors and chips in those cars, it’s going to be a rough, let’s say, year, for all of those car industries for sure,” said Ball.

Potentially getting out of those supply chain issues is the silver lining for dealerships right now.

“We’re heading towards the bottom, I believe, in terms of inventory. Think fall, early winter, we’re gonna get back to a little bit of normalcy in terms of supply,” said Cody Gill.

Chris ball adds it helps there are tax incentives that make buying electric and hybrid cars attractive right now, new or used.