- The Federal Reserve voted to hold interest rates flat at its meeting this week, but predicted a future rate hike.
- That means no short-term help for car shoppers struggling with affordability.
The Federal Reserve held its benchmark interest rate steady at a meeting this week, meaning little short-term change for car shoppers. But members predicted that they’ll have to increase rates later in the year.
Car shoppers have faced a mixed market for much of 2026. Qualifying for a loan is easier than it’s been in more than four years. But the average new-car price has hovered near $50,000 for most of the year, and nearly 6 in 10 borrowers now roll negative equity from an old car loan into their new car loan.
Related: Is Now the Time to Buy, Sell, or Trade in a Car?
About the Fed
- A committee of financial experts with political independence, the Federal Reserve controls a critical interest rate that affects all other interest rates.
The media calls it “the Fed,” but the formal name of the board is the Federal Open Market Committee of the U.S. Federal Reserve. It has significant influence over Americans’ finances.
The Fed controls a single interest rate – the rate for overnight loans between banks. But that rate influences the interest rates banks charge for everything from credit cards to home loans.
The board often says it has a “dual mandate” to keep both unemployment and inflation low.
Fed members often publish “dot plots” that show how each member expects to vote on future rate decisions alongside each rate decision. This week’s plots showed that half of the members expect to raise rates this year.
Fed members have had a chaotic year. They serve 14-year terms, meant to insulate them from political control. But the current White House has sought to fire a member mid-term, and the Supreme Court is currently considering whether that move is legal. The board also has a brand-new chair, Kevin Warsh, who headed his first meeting this week.
CNN notes that Warsh did not submit his own dot plot, a break with tradition, and “His news conference was shorter than those with his predecessor.”
What It Means for Car Shoppers
- Higher rates later this year will increase borrowing costs.
Americans are on pace to buy about 16.1 million new cars this year, according to Kelley Blue Book parent company Cox Automotive. That’s a healthy shopping pace, though slightly below pre-pandemic norms.
But those cars are costing them a lot. The average buyer paid $49,220 in May. A record number of buyers took out 72-month or longer loans. Consumer choice played a big role in that – there are still many reliable cars available for lower prices. But it also reflects growing affordability challenges as automakers build fewer affordable cars each year.
Higher interest rates later in the year would raise monthly payments. But Cox Automotive Chief Economist Jeremy Robb says shoppers should expect it.
“While many consumers and dealers would benefit meaningfully from lower financing costs, there is simply too much underlying strength in the economy — and too much inflation still in the pipeline — for a rate cut to be appropriate,” he explains. “An easing move at this stage would risk accelerating the very inflationary trends the Fed is working to contain.”
