Survey Shows Interest Rates Top Concern

A survey by Automotive News found that car dealers’ biggest concern this year is that steadily rising interest rates will dampen consumer demand.

The Dealer Outlook Survey polled 264 dealers and store managers last month shows 70% of respondents ranked interest rates as one of their top three concerns, worrying that rates will limit sales and stores’ capacity to stock vehicles due to anticipated higher floorplan expenses.

While inventories have increased in recent weeks, cars aren’t selling as fast, potentially leading to higher inventory costs this year, at least one dealer told Automotive News.

The publication said the average new-car loan carried a 6.8% annual percentage rate in January, up from 4% a year earlier, citing J.D. Power data.

One Ohio dealer told Automotive News, though, that prices are more his concern, not interest rates, calling the latter “an excuse not to sell a car.”

Still, 64% of survey respondents believe interest rates will lower demand for new cars, and 53% said they will lower used-car demand.

Meanwhile, 40% of respondents indicated they believe interest rates will also eat into finance-and-insurance sales, 28% saying they’ll likely need to cut reserve to less than last year’s levels in order to close sales.

Interest rates are “chewing up the amount of payment that the consumer can afford that could have gone for products,” Protective Asset Protection Vice President of Dealer Sales Tim Blochowiak told Automotive News.

The survey found that 64% of dealers believe rates will translate to higher floor-planning costs, while half forecast higher overall costs. At least one dealer said he anticipates that higher interest rates will both lower reserve and product sales for each deal at his store.

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