Rates won't be falling as a result of the decision to cut the federal funds rate today.
How soon could it affect you? |
Today's rate cut will likely not affect auto loan interest rates.
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Gary Miller, chief executive officer of FirstAgain.com, says it may be awhile before auto loan interest rates -- and the state of consumer credit, in general -- change.
It is hoped credit markets will be thawed by the drastic cut to short-term interest rates, but that's not the only thing needed, says Miller.
“It's painful in the short term for people that are looking for financing.”
"It's not just what the Fed does but government as well," he says. "Both will put a variety of measures in action to help reduce unemployment and put the pieces of the puzzle together to get the economy going again.
"At that time, as you restore consumer confidence and things like that, you can have potential rate reductions as you take some of the fear spread out of the rates that exist today," he says.
Conclusion
Unfortunately right now the economy is a Catch-22 situation. Tighter underwriting standards are making it more difficult for consumers to get financing to buy things and the economy suffers when consumers can't buy things. Because of the gloomy outlook, even those who can afford to buy on credit are feeling less like spending these days.
"It's painful in the short term for people that are looking for financing, and it is painful from an economic standpoint because the fortunes of the economy are tied to consumer spending, and a lot of that spending has been curtailed because of inability to access credit," says Greg McBride, senior financial analyst at Bankrate.com.
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Fed announcement: June 24, 2009
