How interest rate cuts will impact vehicle sales, auto loans

According to a report from Edmunds, 62% of American car buyers will be holding off on purchasing a new vehicle due to elevated interest rates. Will the Federal Reserve's 50-basis-point rate cut kickstart any reaction from auto customers?

Yahoo Finance senior autos reporter Pras Subramanian highlights the data indicating how consumers and automakers are feeling about the future rate cuts to come.

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This post was written by Luke Carberry Mogan.

Video transcript

A new survey from Edmunds finds that 62% of car shoppers are holding off on purchasing their next vehicle because of high interest rates, while 64% said a Fed rate cut would affect the timing of their next car purchase.

So how will today's super size, 50 basis point impact cut impact car shoppers Pro submarine is here with more pros?

Hey, Josh.

Yeah, so really interesting stuff here from Edmunds.

You know, pandemic fuel prices, higher rates really hit car buyers.

Uh, in the last couple of years, but now we're seeing that, um, we're seeing why we're seeing how the effect could be, how big could be.

So 62% of Americans held off on that car purchase.

Uh, even younger buyers are more affected by this.

72% of buyers under the age of 44 were holding off on a car purchase or that affected their timing because of higher rates and and also EV buyers.

74% of EV buyers said that the rates affected their sort of timing here.

You know, it's not surprising, given what's happening with with, um, high prices, but those are coming down recently, and that's sort of a good thing, plus 5050 basis points.

Is that or should I say, 50 half percentage points?

Kind of a big deal?

Bank of America found that that could affect a much as much as 20 bucks per monthly payment, which doesn't sound like much, but two thirds of Americans living paycheck to paycheck here.

So it is.

There is an effect here for Americans, you know, we're trying to figure out, I guess, how exactly this is going to translate into demand, right?

Just in terms of the fact that obviously 20 bucks a month can be huge here if you're living paycheck to paycheck and you're trying to figure out how you are going to afford the next car in terms of projections, are analysts expecting to see a significant bump?

Is it supposed to be a slight uptick, I guess.

Put that in perspective.

Maybe for what investors could be expecting those returns to look like from some of those large automakers.

I think it's it's going to be a modest bump for now and then we know where the dot plots is 100 basis points by the end of the year.

That could be very beneficial.

But there was also costs for dealership.

So the cost of financing their entire floor, they call it all their cars.

That's kind of a big deal.

A lot of the automakers have locked in long term sort of, uh uh, bonds in place for their own financing, but short term stuff that can also affect in the margins, too, just for the automakers as well as, uh, customers, too.

They're looking for just every little buck they can get to get that new car, because, um, a lot of the the America's fleet is ageing is I think the average age is 12 years per per per vehicle.

It's very, uh, old compared to other Western countries.

So this could help kind of change that fleet.

Maybe maybe get more EVs in the road, too.

You think about the GM news today, GMEV customers.

Right now they get access to Tesla superchargers, and you combine that with the Fed decision.

Some tail winds there maybe.

Yeah, I think so.

I think with GM, it's it's a little bit sort of late here with that, With that, getting that Tesla, uh, plug in to to use those adapters.

Kind of, uh, a few months after Ford got that.

But at the same time, G m's cheaper EVs are coming out now.

The equinox EV around $40,000 before tax credit.

So that's kind of the right time.

Here.

You get these newer EVs coming, you get the Tesla adapters in place of 17,000 or so chargers.

So I think that's good timing there for GM.

And then also, we're talking about financing coming down, too, So we'll see.

All right, Price.

Thank you.

Appreciate it.

Mhm.