What moves auto loan rates?

The federal funds rate, from which the prime rate is derived, is the target rate set by the Federal Open Market Committee. Since December 2008, the rate has been at a range of 0 percent to 0.25 percent.

If the federal funds rate isn’t moving but interest rates on various products are, what’s driving rate changes? Below, Bankrate shows you what is causing rate changes in mortgages, home equity loans, auto loans, CDs and money market accounts and credit cards.

Auto Loans
Financial institutions set interest rates for auto loans for new and used cars based on several factors. First is their cost of funds: How much it costs them to do business, how much it costs them to get the money and, in the case of banks, how much they pay to depositors.

Ultimately, the actions of the Federal Open Market Committee, or FOMC, affect the cost of funds. Changes to short-term interest rates affect how much banks pay to borrow from each other overnight and also the interest rate they pay their customers.

via Bankrate.com