Will Interest Rates On Auto Loans Rise?

The upward trend on mortgage rates might not extend to auto loan rates

Shaun Plum
MoneyTips Contributor

Borrowing Automotive Loan

Will Interest Rates On Auto Loans Rise?
November 16, 2016

The U.S. is undergoing a time of great change, and after the election of Donald Trump as president, mortgage rates have continued to rise. Many consumers may worry that interest rates on other debt, like credit cards and vehicle loans, will also increase. However, this isn't necessarily true, especially because rate increases for shorter-term lending often follow a slower pace.

Auto loans rely on shorter-term measures for rates, such as Treasury yields or the London Interbank Offered Rate (LIBOR). Since the election result, one-month LIBOR rates have barely moved, while there has only been a 0.03 percent gain for the three-month LIBOR. This suggests that shorter-term loans shouldn't see the large jump noticed in the mortgage market.

Treasury yields, meanwhile, have risen by 1.34 percent, marking the largest three-day jump since June 2013. However, both auto lenders and car dealers are flexible in what they charge on top of such fees. In a previous report from Experian Automotive, the second quarter saw average auto loan rates of 4.82 percent; a negligible change from 2015.

Although it remains unclear how much interest rates might rise for auto loans, the jumps are likely to be far less than in the real estate sector. It also depends on how the car market reacts. For instance, to increase sales volume, some lenders might cut their margins to remain competitive. As always, consumers should shop around for the best rate and take advantage of deals when they appear.

If you are interested in an auto loan, visit our curated list of top lenders.

Photo ŠiStockphoto.com/evp82

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