Rising Interest Rates Will Be One of the Biggest Factors Influencing How the Auto Market Fares in 2019

Interest rates for new vehicles dipped slightly for a second consecutive month in December, according to the car shopping experts at Edmunds. The annual percentage rate (APR) on new financed vehicles averaged 5.9 percent in December, compared to 6.0 percent in November and 6.2 percent in October. Edmunds experts note that low interest rate finance deals can be attributed to this overall month-over-month dip. According to Edmunds data, 14 percent of buyers received rates below a 2 percent APR, compared to 12 percent of buyers receiving the same rates in November.

“Holiday sales gifted car shoppers with another slight respite from record high interest rates in December, but in many ways this month was a curtain call for robust finance deals,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “With the holidays behind us and the most recent Fed rate hike kicking into effect, automakers won’t be as inclined to move mountains in the new year, so shoppers can expect average APRs above 6 percent to be the new normal.”

Edmunds experts note that reliable incentives such as zero percent finance deals have all but dried up, threatening to derail industry sales in 2019. According to Edmunds data, zero percent finance loans remained flat month-over-month, but at 5.5 percent hit their lowest December level since 2005.

“Rising interest rates will be one of the biggest factors influencing how the auto market fares in 2019,” Acevedo said. “Access to cheap credit has been a staple of the post-recession auto market and 2018 marked a tipping point for the industry. Interest rates in 2018 closed more than a point higher than they closed 2017, and rates are only going to continue to trend upward, which poses a real threat to shopper demand as we head into 2019.”

More insight into recent auto industry trends can be found in the Edmunds Industry Center athttp://www.edmunds.com/industry-center/.

About Edmunds
Edmunds guides car shoppers online from research to purchase. With in-depth reviews of every new vehicle, shopping tips from an in-house team of experts, plus a wealth of consumer and automotive market insights, Edmunds helps millions of shoppers each month select, price and buy a car with confidence. Regarded as one of America’s best workplaces by Fortune and Great Place to Work, Edmunds is based in Santa Monica, California, and has a satellite office in Detroit, Michigan. Follow us on Twitter, Facebook and Instagram.