When interest rates spike along with unemployment, it is nearly impossible to sell big ticket items. Cars, boats, and recreational vehicles pretty much just sit on a dealer’s lot until the economy recovers. The Fed’s decision to keep interest rates low through 2013 may provide the spark that the economy needs.
Low rates often make people think that they can afford a new car instead of having to wait another year to see what happens. More cars, boats, etc sold, more people back to work, which leads to even more cars sold and new auto loans approved. Enough of that circle of events and the economy returns to juggernaut status.
The low rates were announced as a way to keep the markets from plunging when America’s credit was downgraded. It seems to be working for now. Interest rates may be at their lowest point for a few decades, so now probably is the best time to finance that big ticket item.