The following statement regarding the move by the Federal Reserve to raise interest rates was issued today the National Automobile Dealers Association’s Chief Economist Paul Taylor:
“Today’s interest rate hike of one-half a percent in short-term rates will only modestly affect overall auto sales. While customers financing their vehicles through banks and credit unions will see slightly higher rates, auto company finance entities will likely continue to offer attractive below-market rates (from 2-8 percent).
“Stock market turbulence, resulting in part from the realization that short-term rates will increase over the next six months, will moderate luxury car sales in the next few months. The impact will be concentrated on specialty and sports cars and vehicles over $50,000 in price, continuing the modest pattern of slower growth in luxury-vehicle sales seen in April.”
“The overall automobile market remains very strong, despite this possibility for weaker high-end sales. The overall rate of growth will likely moderate in the second half of the year unless we see a dramatic recovery in the stock market. We anticipate sales for the year to approach 17 million units. Sales could even top the record set in 1999, but we believe that increases in short-term interest rates totaling another one-half percent during the remainder of the year will moderate sales in the fourth quarter. In 2001, auto sales likely will be over 15.5 million units as well, extending the trend of strong sales to four years.”
The National Automobile Dealers Association represents more than 19,500 franchised new car- and truck-dealers holding nearly 40,000 separate franchises, domestic and import.