The surprise decision by the Federal Reserve on Wednesday (Jan. 3) to lower interest rates will help the RV market, according to an executive at Bombardier Capital, a major source of inventory financing for RV dealers.
“The drop in (interest) rates and rebound in the stock market should positively impact consumer confidence, leading to more sales,” said Rick Odom, the Bombardier Capital vice president of RV dealer inventory finance.
“Our rates automatically fluctuate with the prime rate, so our customers will get an immediate benefit,” Odom added.
On Wednesday, the Fed lowered the rate of interest that banks pay on overnight loans between themselves, and several major banks immediately responded by lowering their benchmark prime interest rates to 9%, from 9.5%.
Executives at Deutsche Financial Services (DFS), another major source of RV dealer inventory financing, were not immediately available for comment on the impact of the Fed’s rate cut. However, during an interview last week, Robert Parish, national accounts manager for the DFS RV Group, said, “Lower rates in and of themselves don’t sell RVs, but they do factor into the equation as part of the buying decision. If interest rates move downward, that should provide a boost to the 2001 RV market.”
During the interview last week, Parish anticipated “a slight upturn in (RV) sales” this year because he had assumed the Fed would lower rates during its regularly scheduled meeting at the end of this month.
Meanwhile, a more cautious view is held by Mark B. Johnson, stock market analyst at brokerage firm A.G. Edwards & Sons Inc. Johnson does not believe the rate decrease will have a big impact on the spring RV market because it takes several months for economic conditions to improve after interest rates are lowered.
Additionally, lower interest rates will have no impact on high end Class A motorhome sales because many high end Class A buyers pay cash.
Johnson declined to speculate about the impact of the interest rate cut on the profitability of RV manufacturers.