Index Investing News
Sunday, May 25, 2025
No Result
View All Result
  • Login
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion
No Result
View All Result
Index Investing News
No Result
View All Result

Car loan cost surge pressures manufacturers to reinstate discounts

by Index Investing News
April 2, 2023
in Economy
Reading Time: 3 mins read
A A
0
Home Economy
Share on FacebookShare on Twitter


Rising borrowing costs exacerbated by recent turmoil in the banking sector have sidelined some buyers in the US new car market, putting pressure on manufacturers to discount vehicles.

Cars have become increasingly unaffordable after shortages over the past two years forced consumers to pay at or above sticker prices. The Federal Reserve’s efforts to curb inflation have now driven the average interest rate on a new car or truck loan to 8.95 per cent, up from 5.66 per cent a year ago, according to Cox Automotive, which provides services to car dealers.

This month’s failures of Silicon Valley Bank and other US banks have also prompted other lenders to tighten access to credit in a new car market where more than eight in 10 buyers finance their purchases.

The turmoil has made banks “acutely aware of the risk that they are potentially dealing with and essentially are trying to insure that they are getting a risk-adjusted return”, said Jonathan Smoke, chief economist at Cox Automotive.

The financial squeeze on consumers is bringing discounts back to dealer lots. Discounts, which can take the form of leasing deals, special financing rates or cash rebates, averaged about $1,474 per vehicle in February or 3 per cent of the average transaction price. While well below historical levels of 10 per cent, it was the highest level in a year.

“The first domino to fall is really the dealer mark-ups we saw over the past two years,” said Fitch Ratings analyst Stephen Brown. “We’re already seeing a lot of that start to go away.”

Prices for new cars and trucks remain historically high. In February the average transaction price — how much a buyer paid, including any discounts — was up 5 per cent compared to a year earlier, to $48,763. But the price had slipped 1 per cent from January, according to Cox Automotive.

Elevated car prices have combined with higher interest rates to push up borrowing costs. For a six-year loan on a $45,000 vehicle, Barclays analyst Dan Levy calculated the average monthly car payment had risen from $702 to $748 between the fourth quarters of 2021 and 2022.

Costs have pushed some riskier subprime borrowers out of the market. They represent just 5 per cent of the market for new cars and trucks this year, according to Cox Automotive data, down from 14 per cent in 2019.

Kristy Elliott has seen the impact of rising borrowing costs at Sunshine Chevrolet, a dealership she runs in Asheville, North Carolina. Customers are more “skittish” about larger payments, including ones who were unconcerned last year “because the rates kept increasing on a pretty quick clip”.

“It’s not that they can’t afford a car, but no one likes to pay interest,” Elliott said.

In February, two lenders that served customers of Sunshine Chevrolet abruptly stopped offering loans without giving a reason, Elliott said, forcing the dealership to scramble to continue offering favourable terms. It has relied on GM Financial, the captive arm of the carmaker, to provide customers with rates like 4.99 per cent on a used vehicle.

“They actually stepped up and offered some very competitive rates,” she said. “They sent us an email a couple weeks ago right when SVB failed, just stating that they are financially very healthy, . . . that we don’t have to worry about losing them as a partner.”

Yet plenty of buyers financing new cars and trucks will pay far more. Ally Financial, a market leader in automotive finance, estimated that car loans originated in the fourth quarter of 2023 will yield 9.6 per cent, compared with 7.4 per cent a year before. The bank expects bad debt to rise to 2.2 per cent of average loans outstanding by the fourth quarter, compared to a historical norm of 1.6 per cent.

Analysts say that carmakers need to manufacture more of their inexpensive models to sustain strong sales. When parts shortages capped how many vehicles they could produce, carmakers focused on making the most expensive versions of their priciest cars and trucks and had no reason to discount their products.

General Motors said the company continued to see strong demand for its products and has “been able to grow our US market share with strong pricing”. Ford has predicted that average transaction prices will decline by 5 per cent by the end of the year. John Lawler, Ford’s chief financial officer, told a conference last month that “there’s room to move on dealer margins”, and he sees discounts ticking up in the second half of the year.

While carmakers right now were gunning to sell as many vehicles as possible at elevated prices, the pricing environment was poised to worsen for them, said Tyson Jominy, JD Power’s vice-president of data and analytics.

“Gravity will win,” he said. “Eventually prices will come down. The fact that they’re going sideways in the first quarter, it just means it will be later, and potentially the fall greater.”



Source link

Tags: carCOSTdiscountsloanmanufacturerspressuresReinstateSurge
ShareTweetShareShare
Previous Post

It’s not just WA: There’s a nationwide push to build homes faster

Next Post

Chelsea’s Predicted XI To Face Aston Villa

Related Posts

Donald Trump makes dangerous guess by rekindling his commerce conflict with the EU

Donald Trump makes dangerous guess by rekindling his commerce conflict with the EU

by Index Investing News
May 24, 2025
0

Donald Trump likes to make offers. And he could also be calculating that his sudden escalation of tariffs on the...

The Fed’s not making a revenue

The Fed’s not making a revenue

by Index Investing News
May 24, 2025
0

Unlock the Editor’s Digest free of chargeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.The...

Trump’s subsequent 100 days

Trump’s subsequent 100 days

by Index Investing News
May 24, 2025
0

This week, Swamp Notes goes to London for a dwell recording. Katie Martin, host of the Unhedged podcast, and Chris...

Greenback notches greatest weekly drop since tariffs sell-off over US debt fears

Greenback notches greatest weekly drop since tariffs sell-off over US debt fears

by Index Investing News
May 24, 2025
0

Unlock the Editor’s Digest totally freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.Investor jitters...

Donald Trump ‘not in search of deal’ as he threatens EU with 50% tariff

Donald Trump ‘not in search of deal’ as he threatens EU with 50% tariff

by Index Investing News
May 24, 2025
0

Unlock the White Home Watch publication without spending a dimeYour information to what Trump’s second time period means for Washington,...

Next Post
Chelsea’s Predicted XI To Face Aston Villa

Chelsea's Predicted XI To Face Aston Villa

I’ve Changed My Mind – Econlib

I've Changed My Mind - Econlib

Leave a Reply Cancel reply

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

RECOMMENDED

Man Utd make shock Nkunku transfer; Liverpool planning Van Dijk exit

Man Utd make shock Nkunku transfer; Liverpool planning Van Dijk exit

November 11, 2024
Where can I watch Charlie Brown Thanksgiving: Stream for free

Where can I watch Charlie Brown Thanksgiving: Stream for free

November 17, 2022
7 Actual Property Methods That Died In 2024 (However Brokers Maintain Doing Them)

7 Actual Property Methods That Died In 2024 (However Brokers Maintain Doing Them)

February 10, 2025
RBI and Sebi should redo its abroad funding coverage for AIFs

RBI and Sebi should redo its abroad funding coverage for AIFs

July 12, 2024
Bond market volatility at ‘dangerous’ levels

Bond market volatility at ‘dangerous’ levels

March 15, 2023
Coinbase (COIN), Marathon (MARA), Riot Drop Near 10% as Bitcoin Price Dips to K

Coinbase (COIN), Marathon (MARA), Riot Drop Near 10% as Bitcoin Price Dips to $42K

January 1, 2024
Broker Spotlight: Jerry Pinkas, Jerry Pinkas Real Estate Experts

Broker Spotlight: Jerry Pinkas, Jerry Pinkas Real Estate Experts

February 16, 2023
Wrexham Promoted To Second Tier; Ryan Reynolds, Blake Full of life Rejoice

Wrexham Promoted To Second Tier; Ryan Reynolds, Blake Full of life Rejoice

April 27, 2025
Index Investing News

Get the latest news and follow the coverage of Investing, World News, Stocks, Market Analysis, Business & Financial News, and more from the top trusted sources.

  • 1717575246.7
  • Browse the latest news about investing and more
  • Contact us
  • Cookie Privacy Policy
  • Disclaimer
  • DMCA
  • Privacy Policy
  • Terms and Conditions
  • xtw18387b488

Copyright © 2022 - Index Investing News.
Index Investing News is not responsible for the content of external sites.

No Result
View All Result
  • Home
  • World
  • Investing
  • Financial
  • Economy
  • Markets
  • Stocks
  • Crypto
  • Property
  • Sport
  • Entertainment
  • Opinion

Copyright © 2022 - Index Investing News.
Index Investing News is not responsible for the content of external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In