For several years now, new car buyers have been slammed by not only ever-increasing insurance premiums, but also, sky-high prices and interest rates – making it more expensive than ever to purchase a new (or used) vehicle. As many are already well aware, the Federal Reserve has raised interest rates in an effort to quell soaring inflation, but with demand for new vehicles (and homes, coupled with low inventory of those) remaining high, that hasn’t exactly gone to plan. However, certain vehicles are now facing a bit of a decline in terms of interest, and the Federal Reserve is apparently also looking to cut interest rates, too.
According to CNBC, the Federal Reserve will reportedly cut interest rates today, in fact, a move that comes as inflation has calmed down somewhat compared to its prior levels of growth, coupled with a softening job market. As such, the Fed will reportedly cut interstate rates by a quarter-percent or 25 basis points following its meeting today, though the agency’s long-term plans remain a bit murky following the Presidential election. Federal Reserve Chairman Jerome Powell “will say the Fed will take the time it needs to study the new administration’s plans” and will then “refine this assessment as actual policies are developed and enacted,” said Krishna Guha, head of global policy and central bank strategy at Evercore ISI.
The fed funds rate determines what banks charge each other for overnight lending, and can also have an influence on consumer debt. Currently, that figure is targeted in a range between 4.75-5.0 percent, with market conditions favoring another quarter percent cut in December, a pause in January, and multiple cuts throughout the course of 2025. This could wind up being good news for those in the market for a new vehicle, too.
According to recent data from Cox Automotive, September’s interest rate cut resulted in a decline in the average auto loan rate – by 30 basis points to 9.53 percent, which was the lowest such figure in over a year. However, that drop was offset by a 0.8 percent increase in average new vehicle pricing, though that was also covered by higher incentives and wage growth in terms of new vehicle affordability, which resulted in a middling improvement in that regard over the past couple of months.
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