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automobile loans, interest rate variations, large cities, credit unions, banks, Consumer Price Index
his study presents empirical data on finance charges for automobile loans in 10 large cities. The data were gathered from automobile dealers, commercial banks, credit unions, and savings and loan associations by personally shopping for a new car loan. In addition to institution and city comparisons some information is provided on consumer credit pricing policies. Consumer installment credit receives a great deal of attention from the Federal Reserve System and it plays an important role in the Consumer Price Index. The literature contains considerable material about the volume of consumer credit and the direction that interest rates appear to be heading. However, few empirical data have been published about finance rates for consumer loans.
The purpose of this study was to gather price data on consumer installment credit. Specifically it sought to make an estimation of interest rate variations for automobile loans in large cities. Secondary purposes were to ascertain if some classes of lenders offered lower cost loans than others, and to see if the variations found were common to a number of cities.
The study found that there were rate variations for automobile loans within every type of lender in every city. Credit unions quoted significantly lower rates than the other firms. There was not any pattern of rates common to the various cities. Some interesting data about financial institution pricing policies were found.