The Federal Reserve just swapped an expected rate cut for a projected rate increase in 2026.
A few years ago, that headline might have sent shockwaves through automotive retail. Today, not so much.
Automotive News reports that the Fed held rates steady at 3.5% to 3.75% while revising its longer-term forecast toward a quarter-point increase. Despite the news, dealer concern around interest rates continues to decline. Cox Automotive found that only 36% of dealers now identify rates as a significant challenge, down from 46% a year ago.
"Customers were going, 'Do we hold off? Do we hold off?' And now it's just, 'Nope. This is our bottom. We've got to go for it.'"
— Kyle Mountsier
More on this in the full episode of The Automotive State of the Union here.
How long can someone postpone replacing a transmission?
giphy - “Forecasts, amirite?”
That's the real question.
For years, affordability conversations have focused on financing. But most customers aren't making decisions inside an economics textbook. They're making them in a driveway.
The SUV has 180,000 miles. The repair estimate just hit four figures. The family added a teenager. The commute got longer.
At some point, waiting costs more than buying.
That's why a quarter-point increase isn't likely to create the dramatic sales swings people expect. Customers have already adjusted to higher prices, higher payments, and a more expensive world. The opportunity isn't convincing people that rates are great. The opportunity is helping them make a confident decision anyway.
The stores winning right now aren't waiting for affordability to improve. They're getting really good at explaining affordability as it exists.
Because your customer probably isn't asking whether rates are ideal. They're asking whether the old transmission survives another winter.
