In the short term, the interest rates on auto loans in Louisiana and across the nation did not respond to the debt downgrade. This was in direct contradiction to what some experts believed would happen. The question now turns to the long term recovery of an industry only recently emerging from government bailouts and with a long history of not learning financial lessons.
The entire auto industry relies on the comfort level of the average American. If they do not feel comfortable about their job and financial situation, Americans will not buy a new car. Banks facing a higher rate on the money they borrow from the Fed will, in turn raise rates on loans that they make and usually tighten their purse strings for credit. That leaves the automakers facing slower sales, rising materials costs, higher interest rates further eating into cash reserves, and fewer credit options. All spell out the possibility of hard times for an industry that just peaked out from behind a rock and a hard place.
As personal income struggles to keep up with the rising cost of living and the economy continues to worry the every day car buyer, many eyes are on how the auto industry reacts. Hopefully, the reactions will be sensible, because the government cannot bail itself out right now, let alone help anyone else.