Yields on Treasurys have been increasing, driven by stronger-than-expected economic data that has raised inflation concerns and led to expectations of further interest rate hikes by the Federal Reserve. The central bank recently raised its federal funds rate by a quarter-point to a target range of 3.75% to 4.0%.
As a result, the yield on 30-year Treasury bonds reached 5.446%, the highest since 2004, while the 10-year Treasury note yield hit 5.15%, last seen in 2006. This rise in bond yields typically correlates with increases in auto loan interest rates, as noted by Patrick Manzi, chief economist for the National Automobile Dealers Association.
Auto loan rates have already begun to rise, with new-vehicle loan interest rates increasing by about 20 basis points over the past two months. Jeremy Robb, chief economist for Cox Automotive, indicated that while these changes may not significantly alter average payments, they could negatively affect consumer sentiment and discourage large purchases.
The average interest rate for new car loans was 6.35% in the second quarter of 2026, down from 6.79% a year earlier, while used car loans averaged 11.2%, down from 11.57%. With the average price of a new car around $50,000, financing costs are becoming a critical factor for consumers.
Experts recommend that car buyers broaden their financing search and consider pre-approval to secure the best rates, as even a 1-percentage-point difference in interest can significantly impact monthly payments and total interest paid over the life of a loan