Worried About Higher Interest Rates? Tesla Now Offers Auto Loans That You Can Pay Off In 7 Years.

Zinger Key Points
  • The Fed rate is now at a 16-year high of 5%-5.25%, and hawkish central bank officials are pointing to more hikes down the line.
  • Tesla has begun offering loans with an extended duration.

Tesla. Inc. TSLA CEO Elon Musk previously expressed concerns about the impact of rising interest rates on car purchases and floated the prospect of cutting vehicle prices even further.

What Happened: The company's website shows that the duration of a loan extended by a Tesla financier or third-party lender will now be 36 to 84 months. The cap was previously at 72 months.

This suggests that cash-strapped customers can now spread their payments over a longer duration. Since March 2022, the Fed has hiked the fed funds rates aggressively in the current tightening cycle.

But there is a downside to Tesla’s updated payment plan — customers could pay more than their car's actual value if they agree to the extended-period option.

See Also: Best Financial Services Stocks

Why It’s Important: Thanks to the Fed’s successive and aggressive hikes, interest rates are now at a 16-year high of 5%-5.25%. To assess the impact of the rate hikes, the central bank agreed to a pause during its June meeting.

The Fed's monetary policy setting-arm, the Federal Open Market Committee, is set to meet next week to decide on its monetary policy. The futures market has priced in nearly 100% probability of a 25-basis-point increase in rates to 5.25%-5.50%.

Central bank officials, in their public appearances, have continued to signal that more rate hikes could be on the horizon.

Musk has been a critic of the monetary policy and has, in the past, expressed worries about the Fed pushing the economy into a recession.

Tesla closed Friday’s session down 1.10% at $260.02, according to Benzinga Pro data.

Check out more of Benzinga’s Future Of Mobility coverage by following this link.

Read Next: Cathie Wood Booked Profit On Some Tesla Holdings Ahead Of Stock’s Post-Earnings 11% Plunge — Here’s How Much Ark Sold This Week

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