Who's buying a vehicle before the Fed increases interest rates more?

[PVHunter]

I'm going to wait for the repos to start rolling in. You can already see the cracks showing in autolending. Let's see if the used market softens up for some of these trucks that are 1 - 3 years old and get hooked.

 

[30338]

Ford? Let me know … looking at gas f250s

Check Granger Ford in Iowa. Super cheap to fly into Des Moines and drive one home. Bought one from them last year and it went very smooth. Love the 7.3 gasser.

 

[JD Jones]

. Love the 7.3 gasser.

That’s the general consensus I see!

 

[SDHNTR]

Interest rates should not dictate a vehicle purchase for most people, imo.

 

[rtaylor]

I tend to look at things in longer blocks of time. At the end of 5 years how much money is going to exit my checking account. New vehicle $40,000+ current vehicle $5000. I'm hanging on to my current vehicle.

 

[Dos Perros]

It would depend on how unreliable the old vehicle is getting but I don’t really get rid of vehicles until they become unreliable.

If the cost to me is the same and it doesn’t have to spend time in the shop or leave me stranded on the side of the road, I am going to take that any day.

This all coming from someone that drives a 22 year old pickup.

Well you have me beat. Mine is 17 years old. I've never had an unreliable I guess, so never had to get rid of one. We have 3 vehicles for 2 drivers so one in the shop is not really a big deal.

I also seem to eschew vanity, at least vanity expressed as automobiles. Saying that, I'd take a Marty McFly 4x4 in a heartbeat.

 

[30338]

My goal is .10 per mile depreciation. I have been slightly under and slightly over but lifetime is right at .10 per mile. I tend to drive a lot for business so reliability is very important to me. Interest rates don't figure in much.

 

[CorbLand]

Well you have me beat. Mine is 17 years old. I've never had an unreliable I guess, so never had to get rid of one. We have 3 vehicles for 2 drivers so one in the shop is not really a big deal.

I also seem to eschew vanity, at least vanity expressed as automobiles. Saying that, I'd take a Marty McFly 4x4 in a heartbeat.

Having an extra absolutely helps. My wife and I have pretty conflicting schedules so if a vehicle goes down it’s a pain. Not impossible but a pain.

I am hoping prices start to come down and that my pickup can hold out long enough for that to happen. It’s starting to get to unreliable and I don’t trust it for longer trips. I would also really like something that is better on gas. This 11 miles to the gallon is getting expensive.

 

[Billogna]

My goal is .10 per mile depreciation. I have been slightly under and slightly over but lifetime is right at .10 per mile. I tend to drive a lot for business so reliability is very important to me. Interest rates don't figure in much.

I have a formula for reliability/value as well. Vehicle should last approximately10k miles for every thousand dollars in purchase price - with NO major repairs. Vehicles in this range are an excellent value. It helps with being able to gamble on a used vehicle.

 

[GringoBling]

I'm in the auto finance industry, specifically setting interest rates. A 25bps increase by the Fed isn't going to have much of an impact. The drop off in car buying has lenders competing for the smaller pool of business, and despite the increase in the cost of funds, not all of that is getting passed on to the consumer. There will be more constraints on the overall structure of the deal right now in this current market (more cash down reqd., more stringent PTI/DTI/LTV, etc.)

 

[MattB]

Was surfing around chevy website . They have 0% financing through gmac for "well qualified " buyers for 1/2 ton trucks . Not sure of the ties between feds rates and auto loans if any ? Man are they pricey. n
Not planning on buying one soon ! Hopefully used market will soften . Good luck

They are directly related. GMAC has to get their money from somewhere. But the 0% financing isn't a commentary on the Fed funds rate or Chevy's cost of funds, but rather how much Chevy is willing to subsidize the interest rate in order to move vehicles of the lot.

 

[william schmaltz]

The drop off in car buying has lenders competing for the smaller pool of business, and despite the increase in the cost of funds, not all of that is getting passed on to the consumer.

How much of a drop off are you seeing? Are there actually published numbers? Just curious.

I was convinced last summer and planned on buying a new pickup this winter. I just couldn't do it. Between the cost and the uncertainty, my frugal brain couldn't pull the trigger. Put about $3000 into my 250K mile, 18 year old dmax I've had for 12 years and that will get me another 5 until I got to go through it again. Then planned on updating my wife's vehicle and had the same apprehension. Average mortgage and vehicle payments at an all time high. Credit card, consumer, and student loan debt at an all time high. Cost of goods doesn't seem to be slowing down. There has to be a breaking point on the horizon and I'd like to be cash heavy to pick up some assets instead of another liability in the short term. Or pick up a repo or deal from a desperate dealer/private party.

 

[5811]

I have a formula for reliability/value as well. Vehicle should last approximately10k miles for every thousand dollars in purchase price - with NO major repairs. Vehicles in this range are an excellent value. It helps with being able to gamble on a used vehicle.

Do you have any examples for this? I'm thinking it doesn't work for anything costing 20k or more, but maybe works for used cars in the 3-10k range?

Otherwise, I think you 10c/mile guys are confusing mopeds with automobiles.

 

[MCS]

The fed fund rate does not change auto interest rates. Treasury bonds have a lot more to do with rates for loans.

 

[Billogna]

Do you have any examples for this? I'm thinking it doesn't work for anything costing 20k or more, but maybe works for used cars in the 3-10k range?

Otherwise, I think you 10c/mile guys are confusing mopeds with automobiles.

It's more of a personal guideline for value of used cars for me. "Value" is also subjective. The standard I used above is also for an Excellent value vehicle. By that metric a new truck should last 500k 750k mile before a major repair right?? It falls apart on the higher priced vehicles because they are grossly overpriced for what you're getting. There are several used vehicles out there you can reasonably expect to get 7.5k-10k miles per $1000 spent.

 

[GringoBling]

How much of a drop off are you seeing? Are there actually published numbers? Just curious.

We're down about 20% from this time last year. Lots of lookers, but not nearly as many buyers. It's compounded by the price of new cars along with the higher interest rates, causing payments to jump so high. 72 month terms used to be an outlier, now 84 is becoming more common to bring down monthly payments. Same thing that the housing market is seeing- higher priced houses w/ higher interest rates leading to sky high mortgages.

 

[dutch_henry]

The fed fund rate does not change auto interest rates. Treasury bonds have a lot more to do with rates for loans.

I agree they are a factor. But respectfully, the Federal Reserve interest rate hike drives the US prime rate--and that in turn drives up the cost of money for personal lending, including auto loans. That's been a major factor (but not the only factor) in auto loan interest rates climbing by an average of two points since since this time a year ago.

Treasury bonds have a weaker correlation with auto loans, though stronger with mortgages, which is more or less in line with the time horizons banks need to protect themselves within. Then again, talk to six different economists and you'll hear twelve conflicting opinions.

 

[Clownbuster]

Spend all your money today, it's worth less tomorrow.

 

[fmyth]

Was surfing around chevy website . They have 0% financing through gmac for "well qualified " buyers for 1/2 ton trucks . Not sure of the ties between feds rates and auto loans if any ? Man are they pricey. n
Not planning on buying one soon ! Hopefully used market will soften . Good luck

GM just offered their salaried employee's a cash buyout. I'd say sales are slowing down and will continue to do so. My local Ram dealers are offering 8k off 1500's and 5k off 2500's already.

 

[dutch_henry]

Having an extra absolutely helps. My wife and I have pretty conflicting schedules so if a vehicle goes down it’s a pain. Not impossible but a pain.

I am hoping prices start to come down and that my pickup can hold out long enough for that to happen. It’s starting to get to unreliable and I don’t trust it for longer trips. I would also really like something that is better on gas. This 11 miles to the gallon is getting expensive.

I'm in the same boat as you and @Dos Perros. My suv will turn 18 this year. Right now we're a one vehicle household and that mostly works for us. It won't forever. But decisions like that have meant we carry virtually no debt and even the mortgage is tantalizingly close to gone.