Oct 31st, 2007 by Frank Mangano
The Federal Reserve Board today just announced at the 2:15pm EST update a decrease in the Fed’s fund rate by .25%, lowering the rate in which banks can borrow money on short term to 4.5%. This is the lowest since April 2001. Unless you have been under a rock, you see and hear about the weakness in the housing market and higher oil prices effecting the economy. The Federal Reserve sees this as well, and is trying to keep the economy moving forward with these difficulties around all of us. The U.S. consumers ability to spend money is the key to economic growth.
Why is this important to you as a buying consumer? Well, this rate being lower means banks can lower interest rates on credit cards, home equity loans, and auto loans. That is right, even with all the trouble the manufacturers are having selling cars we have seen discounts and incentives to get consumers into the dealerships, you now have more incentive to buy. After the .50% rate cut last month and now another .25% your cost to buy a car is continuing to drop. As an example, if you purchase a $25,000 car and would have paid 7% interest on it in August, and held off and purchased it now, you will save approximately $400 over the life of a 48 month loan. When you combine this with dealer and manufacturer incentives buying a new car is starting to look pretty good.