How does growing interest rates affect me getting car finance?
24 April 2023
By Joy Pearson
Interest rates are a crucial factor when it comes to getting car finance. As interest rates rise, it can have a significant impact on the car finance industry and consumers looking to finance a vehicle. In today's post, we'll discuss how growing interest rates will affect people getting car finance and the industry as a whole.
Firstly, let's talk about how rising interest rates will impact consumers looking to finance a car. As interest rates increase, borrowing costs will go up. This means that consumers will have to pay more to finance a car, either through a higher monthly payment or a longer loan term. This can make it more challenging for some consumers to afford a new or used car. Additionally, consumers with poor credit scores may find it even more difficult to get approved for car finance as lenders may tighten their lending criteria.
On the other hand, rising interest rates can benefit savers who have invested in fixed-rate savings account. As interest rates increase, so will the interest rates on savings accounts, providing savers with a better return on their investment.
Now let's look at how rising interest rates will impact the car finance industry. Higher interest rates can reduce the number of people who can afford to buy a car, which can result in fewer car sales. This, in turn, can impact car manufacturers and dealerships who rely on sales to stay profitable. On top of that, rising interest rates can lead to a shift in demand toward used cars rather than new cars, as used cars typically have lower financing costs.
However, rising interest rates can also benefit the car finance industry. As interest rates increase, lenders can earn more money on the loans they provide, which can then boost profits. Likewise, higher interest rates can help to reduce the risk of default for lenders, as borrowers are more likely to make their loan payments on time.
In closing, rising interest rates can have a significant impact on the car finance industry and consumers looking to finance a vehicle. While it can make it more challenging for some consumers to afford a car, it can also benefit savers and the car finance industry. It's important for consumers to stay informed about interest rate changes and to shop around for the best car finance rates. By doing so, consumers like you and I can make informed decisions when it comes to financing a car.