Banking turmoil makes auto loans harder to secure
- Recent bank collapses have caused some to pull out of smaller banks
- As banks lose customers, it tightens their ability to give out loans
- The Federal Reserve is expected to hike interest rates to fight inflation
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(NewsNation) — Americans are having a hard time buying big-ticket items as high interest rates and recent bank bailouts make getting a loan increasingly difficult.
Despite the recent turmoil that hit the banking sector, the Federal Reserve is expected to raise interest rates again in its fight against inflation. As a result, Americans considering purchasing things like a house or car will likely face obstacles.
The uncertainty in the banking sector is not only impacting Americans’ approach to how they spend their money, but also where they keep it. The recent bank bailouts have caused many depositors to move money from smaller banks to larger institutions, making it more difficult for regional banks to lend.
Transportation correspondent Mike Caudill spoke to NewsNation about the impact of high interest rates on the auto industry.
“The first question was, ‘How’s that going to impact the auto industry?’ There were only a handful of companies that were tied into it, none of them major. The biggest name that you would know is True Car; they received a significant amount of funding from Silicon Valley Bank,” Caudill said.
Caudill says as it becomes harder to nail down a car loan, car manufacturers will likely bring back fair prices.
“Good part of this is that you’re gonna start to see vehicles come back to dealership lots, but what does it mean as far as actually buying the vehicle? It means consumers are going to have to negotiate harder than they ever have. And the good news is, they can,” Caudill said.
The average price for a new car is now $50,000, and used car prices have gone up more than 40% in the last year, according to Kelley Blue Book and the Bureau of Labor Statistics.
In 2022, around 80% of new car purchases and about 40% of used car deals involved financing, according to credit reporting firm Experian.
Caudill says big names in the industry aren’t going anywhere.
“Consumers in a period like this where inflation numbers are high, they’re going to go with brands that they know are not going to go anywhere. They’re gonna go to a Ford, they’re gonna go to a General Motors, they’re gonna go to a Toyota, they’re gonna go to a Lexus, they’re gonna go to brands that they trust.”
