Interest rates are nuts!
If you’re in the market for a car and you need to borrow money for it, now is not exactly a great time. Even the best interest rate I can muster with my excellent credit these days is in the five percents. On a typical 60 month loan for an average priced car ($48,000), I’m looking at about $7,500 in interest alone. A net 15% taxation on the purchase price, because the central bank says so.
Hey, it’s great time if you’ve got cash - savings account are finally earning a healthy return again, but not so great if you need to borrow. The situation is even worse for home buyers looking to plop down at least a million for a home in the San Francisco Bay Area. The money towards servicing just the interest must be depressing.
That’s the point, isn’t it? The Fed raises interest rates to stop people from spending, thereby creating downward pressure on inflated prices. The problem is, the average transaction price of news cars have not come down fast enough. Demand is still high due to the chip supply shortage. If you’re in the market for a car right now, it’s a double whammy: high purchase price and borrowing cost.
At least one car company is offering incentives, however. Tesla announced a $7,500 price cut for customers taking delivery of cars by the end of calendar 2022. Got to juice those year-end numbers, am I right? The news got my friend - who’s been considering an electric vehicle for his next car - pondering on finally purchasing a Tesla Model Y. The best interest rate he can get from a bank is the same as me - mid five percent. On a $60,000 car, he’s staring at an interest bill of nearly $10,000. Ouch.
But we Chinese folks have a secret weapon: the bank of mom and dad. Thankfully, the only interest they charge is the unending commitment to filial piety. Easy peasy.
No filter, all sunset.