Will Debt Cap Fight Keep You from Buying a New Car?
A long-term default on U.S. paper or a downgrade of America's debt will almost certainly add to all of the interest rates pegged to Treasuries. Industries that are already under sales pressure will face new struggles in the second half if that is so. June car numbers were disappointing in an industry which needs over 12 million new light vehicles sales a year for most of the manufacturers to be modestly profitable. The sales situation has not been helped by production that is off-line in Japan which has hampered the import of popular cars like the Toyota (TM) Prius.
A car buyer who wants to get a new vehicle as 2011s go on sale or attractive 2012 models come to dealers for the first time, could have to pay hundreds of dollars in total monthly payments over the course of a three year loan at 3%, compared with a 2.5% rate before the government debt fiasco. On 60-month loans, a .5% increase could push total repayment up by $1,000 or more.
Good luck to the showroom dealers - this will be one to watch.