This week’s interest rate hike means many hopeful car buyers are having to pump the brakes.
The Federal Reserve approved the largest interest rate hike in 30 years, hoping to slow inflation and speed up the economy. But it’s hitting consumers hard.
"My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation," said Jerome Powell, Federal Reserve chairman.
In the past, low interest rates have been key to getting buyers into the car they want. But now, the car buying experts at Edmunds say the average interest rate on a new car loan hit 5.1% in May. The average monthly payment for a new car hit $650 and $546 for a used car.
Car makers are also facing supply chain problems, especially with microchips.
"You can buy a car not fully configured," said Ivan Drury, senior manager of insights at Edmunds.com. "They're gonna have to add that chip later, you'll finally get those heated seats in like six months."
The low supply of cars is driving demand is even higher.
"Right now I think there’s so much demand that people are just gonna you know, write that check," Drury said. "But at some point, it will be too much, and we are seeing consumers drop out because of the new inventory crisis alone."
The best advice, experts say, is to do your homework and shop around for the best possible rate.
"Be willing to hear what the dealer has to offer because they will make money off of financing you but at the same time, they still might have better rates than a credit union or a bank," Drury said. "But just be cognizant, like find out what kind of rate you can get from almost everybody. You don't want to find out after the fact. That's always the worst."