Fed Rate Cut Could Help EV Sales

By Douglas McIntyre • September 19, 2024

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One barrier to car purchases in the US today is high car loan rates. In the case of EVs, add that to reluctance based on price, range, and a low number of charging stations. While the Fed rate cut will help all car sales, it may trigger higher EV sales.

Tesla car loans are an example. Currently, the rate for a 72-month loan to buy a Model S is 5.59% APR and requires a 5% down payment. Like other car companies, Tesla needs relatively high car loan rates to cover its own cost of the capital used for loans.

EV Loans

Some banks offer slight discounts for EV loans. PFCU offers interest rates “as low as 5.74% APR. Buyers of electric and hybrid vehicles can get discounts of .50% in some cases.

Gas Cars

New gas-powered cars need to clear a much lower bar for most consumers. Americans still want the benefit and comfort of cars sold through dealerships, which Teslas are not. They also want a good idea of repair costs, which people who have owned gas-powered cars probably do. They want access to America’s 145,000 gas stations. Although these cannot be offset completely, a lower cost of ownership because the Fed cuts interest rates could help.