Interest rates on car payments not heavily affected by BoC key interest rate drop
“It doesn’t seem to have a huge impact in the short term. Of course, in the long term rates come down and that is going to incentivize people a little bit,” says Collette.
On Wednesday, the Bank of Canada reduced its key rate by a quarter percentage point, bringing it down to 4.25 percent.
This reduction is seen as positive news for those struggling with high interest rates and for individuals considering large purchases like new vehicles.
However, Michael Collette, manager of Siman Auto Sales in Regina, which has been in operation for 25 years, notes that the rate cut doesn't significantly impact sales.
“It doesn’t seem to have a huge impact in the short term. Of course, over the long term, as rates decrease, it might incentivize people a bit more,” says Collette.
He adds that interest rates on used vehicles typically range from eight to ten percent and have remained unchanged since before the Bank of Canada began its rate reductions in June.
Nevertheless, the Bank of Canada’s action still attracts interest, according to Quint Xie, general sales manager for Taylor Toyota.
“The perception has shifted, so more people come in to look at a vehicle because they’ve heard about the rate drop. It definitely helps,” says Xie.
Collette emphasizes that the effect largely depends on an individual's credit rating.
“If you have damaged or subprime credit, rates can vary significantly. The changes in the Bank of Canada’s rates have had no impact on the subprime side, but for prime credit, banks are more willing to issue loans, though it hasn’t really altered the interest rates.”
