How does the Fed interest rate affect car loans?

Core Insights - The Federal Reserve's decisions on interest rates significantly influence the cost of borrowing for consumers, including auto loans [2][6] - The Fed's benchmark interest rate affects the prime rate, which auto loan lenders use to set their rates, but does not directly control auto loan rates [4][5] - Recent rate increases since early 2022 have raised vehicle financing costs, but subsequent rate decreases are expected to lower average auto loan rates through the end of 2025 and into 2026 [4][6] Impact of Fed Meetings - Fed meetings provide transparency into economic conditions and interest rate expectations, impacting the cost of loans for consumers [6] - Decisions made during these meetings influence how much banks charge each other for lending, which indirectly affects consumer loan rates [5][7] - The Fed's recent rate cut in December 2025 brought the target rate to 3.50-3.75%, with stability observed in early 2026 [7]