Auto loan rate forecast for 2017

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Auto loans

In 2016, the best rates for borrowers with good credit have been below 3 percent for both new and used and cars, McBride says. In 2017, he expects the best rates to remain in the low threes.

However, the average rates last year were a bit higher, and in 2017, McBride foresees the average rates to increase as well.

“The average rates in 2016 have been in the low 4s (new cars) and high 4s (used cars). In 2017, I expect the average rates will rise to 4.5 percent on new cars and 5.2 percent on used cars,” McBride says.

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Oliver Strauss, chief economist at TrueCar, also notes that with the recent Fed funds rate hike and an expectation of another rate increase, auto loan rates likely will go up a smidge.

“Fed funds and auto loan rate are about 90 percent positively correlated looking at the historical relationship,” Strauss says. “Thus, one can expect that increase in the (federal) funds rate to be mirrored in the auto loan rate, but in a lagged fashion, as it takes some time to have it propagated through the commercial banks/lender.”

Still, McBride says the auto lending landscape will remain “very favorable.” The small uptick in auto loan rates will have minimal impact.

“The impact on future borrowers is really minimal,” McBride says. “No one will have to downsize from an SUV to a compact.”

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