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Interest Rate Hike to Have Only Limited Effect on Auto Sales, NADA Says

17 May 2000

Interest Rate Hike to Have Only Limited Effect on Auto Sales, NADA Says

    WASHINGTON, May 16 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."