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Lower Car Prices Might Not Signal Buyer Relief

Here’s the sad part about our economic situation…


There’s plenty of data showing car prices are falling, both for new and used models. While that might sound exciting, you might be in for a huge shock if you rush out to a dealer to take advantage. As pointed out by WCNC Charlotte, interest rates are on the rise, counterbalancing prices.

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Even though the sales price of the car you purchase might be lower, with a higher interest rate charged by the bank, your monthly payment amount could be the same or even higher. That’s ironic to most consumers but it’s a sad reality of the situation we’re in. To combat inflation, the Federal Reserve has been ratcheting up interest rates, with banks following suit.

The higher the interest rate on a loan, the less you can afford to spend overall. That’s because more of your monthly payment is going toward interest instead of capital, or the original purchase price. If things were to remain equal, that would mean increased interest rates would definitely lead to your being able to buy less car. But prices are falling at the same time.

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In other words, the changing situation might or might not work out to your advantage. Things are shifting pretty rapidly both in pricing and interest rates, plus the rate you get might be different from your sibling, neighbor, or friend because of credit rating and other factors. So it’s all pretty complicated.

What it comes down to is in this shifting market with prices deflating, cash is still king. Yes, dealers will try to persuade you to finance a vehicle because there’s a benefit for them, but if you can afford to shell out for the full purchase price of a car, you might be the one who really wins out as prices take a plunge.

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