Fed Rate Hike Sets Stage for Higher Car Loan Costs

The Federal Reserve has increased its benchmark rate to 4.00%, marking its first hike in over two years, and is expected to push car loan costs higher for both buyers and automakers.

New Federal Reserve Chairman Kevin Warsh raised rates by 0.25 points, with a further hike possible in October despite President Donald Trump's warning that it might prompt him to scale back commerce with countries running trade deficits.

Average transaction prices have already risen significantly, from near $34,000 in early 2015 to over $48,600 by the time Trump was sworn in, and are expected to increase further.

New-vehicle borrowers currently face a 6.35% APR, while used-vehicle buyers with good credit face 11.26%, and typical new-vehicle buyers now carry $43,920 in financing stretched over an average 60 months with an average monthly payment of $748.