Rising Rates Translating to Less No-Interest Auto Loans

With a monetary policy meeting slated for later this month, Rosengren also forecasts that the current federal funds rate will float between a range of 2.5% to 3%. After the two previous rate hikes earlier this year, the current federal funds rate stands at 2, which could affect auto loan offerings sensitive to these short-term interest rate moves.

In addition to the strong stock market and GDP, the latest employment data reveals a robust job market  despite private payrolls missing its expectations. Companies added 163,000 jobs in August, which represents a tangible slowdown versus the 217,000 added in the previous month and below the average of 206,000 a month.

Additionally, the month of August revealed a steep decline in hiring by small businesses, but in spite of this, the labor market continues to thrive. Furthermore, this sentiment is paired with an unemployment rate that continues to be at historically low levels.

While no-interest auto loans are declining, Edmunds says that getting a good deal on a vehicle purchase can still be had, but consumers must “be more creative, combining a competitive interest rate with an incentive that the carmaker is offering. If you also can find a vehicle that has a deep discount from the dealership, the lack of zero percent financing becomes a nonissue.”

For more trends in fixed income, visit the Rising Rates Channel.