• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
GoLoans

GoLoans

  • Personal Loans
    • Signature Loans
    • Debt Consolidation Loans
    • Wedding Loans
    • Home Improvement Loans
    • Signature Loans
    • Medical Loans
      • Dental Loans
  • Business
    • Business Loans
      • High-Risk Business Loans
    • Business Credit
  • Home Loans
    • Home Equity Loans
    • Home Equity Line of Credit
    • Bad Credit Home Loans
    • First Time Home Buyer Loans
  • Bad Credit Loans
    • Tribal Loans
    • Installment Loans
    • Payday Loans
    • Car Title Loans
    • No Credit Check Loans
    • Emergency Loans
    • Same Day Loans
    • Short Term Loans
  • Auto Loans
    • Bad Credit Car Loans
  • Student Loans
    • Private Student Loans
  • Financial Help
    • Free Credit Score
    • Loan Sharks
    • Debt Relief
      • Debt Management Plan
      • Credit Counseling
    • Credit Repair
      • Credit Repair Companies
    • Calculators
      • Car Title Loan Calculator
      • Motorcycle Loan Calculator
    • Credit Monitoring Services
  • Reviews
    • Lenders
      • Bad Credit
        • Tribal Lenders
Home » Auto Loans » Here’s How the Fed’s Interest Rate Cut Affects Auto Loans

Here’s How the Fed’s Interest Rate Cut Affects Auto Loans

August 6, 2019 by Brian Allen

On July 31, 2019, the Federal Reserve made the decision to cut interest rates by 0.25%. This move will mostly benefit homeowners and new home buyers , but how does it affect consumer auto loans?

The current interest rate movements in the market have an impact on almost everything in the marketplace.  Borrowing costs change, deposit rates can change, and companies can shift their current cash flow activities. Consumers will notice the changes relatively quickly through lower interest rates on both borrowings and deposit products.

Mortgages are one of the most common products people think of when rates move because the 30-year fixed is arguably the most popular product tied to the Fed’s interest rate activities. However, a rate that you may not pay attention to are the auto loan rates, which for many financial institutions are a large portion of their overall portfolio. One of the main differences you’ll notice right out of the gate are auto loan rates do not move in lockstep with the Fed Funds Rate.

With a mortgage, you can see an almost instant pricing change, but with auto loans they may move minimally or not at all. A main reason for this type of pricing are auto rates tend to be less expensive to begin with.

Auto loans are a common and frequent loan type, making the market extremely competitive. If you have solid credit you can easily find rates that are lower than 3% and depending on the dealership you can potentially find a 0% interest rate. With that in mind, it can be difficult to reprice auto rates in step with the Fed’s interest rate. Now, some of the benefits you can look forward to with lower interest rates are just that, a lower interest rate. The cost of borrowing is going to be less, meaning your dollar will go further. The main places you can look for an auto loan include the dealership, a bank or a credit union.

Typically, you will find a lower interest rate at a credit union and this is because they are a non-profit and their interest lie in returning value to their depositors. From there you can go to a traditional bank and lastly going through the dealership.

Another benefit includes the ability to refinance your auto loan if you were unable to secure a competitive rate. One of the main differences between auto loans and mortgages are the length of the note. Auto loans are typically 7 years or less, meaning the interest rate must move a bit more to make an impact. For example, if your auto loan is currently at a 7% and you can refinance into a 4%, that is certainly worth exploring. Keep in mind though you don’t want to re-extend the length back out to longer than your current note because you may not save as much or any money at all.

The final impact that can dictate your interest rate is your credit score. Unlike a mortgage, auto loans tend to price according to your credit score more closely. An interest rate attached to your note is how the lender measures risk.

Now, this trickles into your note because as rates become lower, businesses can borrow at a lower rate and potentially take on a bit more risk. This means if you were priced with a 650-credit score at 7%, you may be able to shop and get a rate closer to 6%. While this is a bit more intricate, it is worth noting during your research process. Rates seem as if they may continue lower, but speculation is something to exclude from your decision-making process.

Right now, rates were lowered in July and that means borrowing will be less expensive. While you are looking for an auto loan you may not see rates falling immediately, but as rates may fall eventually you will see that reflected in the auto loan market. Increase your odds of benefiting by shopping in the right places and visit a few financial institutions. Start with credit unions and use the dealership financing as a last resort. If you get a less competitive rate, look to refinance when possible and save yourself interest expense. Keeping an eye on the interest rate environment is not only good knowledge but it can have a direct impact on your wallet.

Filed Under: Auto Loans

About Brian Allen

Brian Allen has been helping people make smarter financial decisions for over 10 years. As the Editor-in-Chief for Goloans, Brian writes about sage financial advice, "how to" articles, and reviews about lenders and creditors.

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

RESOURCES

Featured Articles

  • Microcredit 101: Understanding Microcredit Services and More
  • $5000 Bad Credit Personal Loans Guaranteed Approval
  • What Happens to Loans When You Die?
  • What is a Doorstep Loan?
  • Need to Borrow Money? Here’s the Best Way to Do It
  • Pawn Shop Loans: Everything You Need to Know
  • Do Chinese Loan Shark Companies Really Exist?
  • What is Harassment of Debtors?
  • Options for Dealing with Debt: Don’t Ignore It
  • Why are Loan Shark Interest Rates So High?
  • Usury: Everything You Need to Know
  • How to Deal with Loan Sharks
  • Microfinance Loans: How MicroLending Can Change the World
  • Finding Loan Sharks on the Dark Web
  • What is Predatory Lending?
  • How to Avoid Loan Sharks
  • How to Start a Makeup Business
  • What You Need to Know About Gun Loans and Financing
  • How to Start an Etsy Business
  • How to Start a Commercial Trucking Business
  • How to Start a Tax Preparation Business
  • How to Start a Property Management Business
  • How to Start a Financial Planner Business
  • How to Start a Bookkeeping Business
  • How to Start a Boat Charter Tour Business
  • How to Start an Airbnb Host Business
  • How to Start an Import/Export Business
  • Cannabis Business Loans: Where To Find Them
  • Huge List of HUD Section 184 Lenders (2021)
  • Motorcycle Loans: How to Find the Best Lenders Online

Footer

Advertiser Discoslure

GoLoans is reader-supported. When you buy through links on our site, we may earn an affiliate commission

© 2018–2023 · GoLoans | About | Contact | Terms of Use | Privacy Policy