Skip to main content

European Auto Financing Costs Rise, Leading to Higher Car Loan Rates for Consumers

Published: 6.8.2023

European car-financing businesses are facing increased costs as they trade their cheap bonds for more expensive debt. This development is expected to result in higher car loan rates for customers. Automakers such as BMW, Mercedes-Benz, and others recently sold 8.45 billion euros ($9 billion) in bonds in European markets, making it the most significant month for auto debt issuance in six years, according to data compiled by Bloomberg. However, the higher rates at which these companies are securing debt are likely to have a direct impact on consumers, who will face more costly vehicle financing options. 


The rise in bond yields for auto companies has financial experts predicting a trickle-down effect on consumers. Antoine Lesne, the head of ETF strategy and research at State Street Global Advisors, explained, "Higher bond yields for auto companies means the cost of car leasing will go up." This means that consumers can expect increased interest rates and potentially higher monthly payments for their car loans and leases. 


The shift from cheap bonds to more expensive debt by European auto companies reflects the changing dynamics in the financial markets. Factors such as rising interest rates and increased market volatility contribute to the higher borrowing costs for these automakers. As a result, they need to pass on these additional expenses to their customers to maintain profitability. 


The impact of higher car loan rates may influence consumers' purchasing decisions and affordability. Some potential car buyers could reconsider their plans due to the increased cost of financing. Additionally, those already committed to purchasing a vehicle may need to adjust their budgets or explore alternative financing options. 


While the rise in borrowing costs is likely to pose challenges for consumers, it is important to note that this trend is not unique to the auto industry. Many sectors are grappling with higher borrowing costs due to market dynamics and changing interest rates. However, the automotive industry's prominent role in the economy makes it particularly noteworthy when higher debt costs are passed on to consumers. 


As the situation unfolds, it will be crucial for consumers to carefully evaluate their financing options and explore different avenues for securing the best possible rates. Additionally, industry experts will continue to monitor how these increased costs affect consumer demand for vehicles and the overall health of the European auto market. 


Stay up to date
Read industry news, product offers, and events.
Join email list