Tesla price financing now more expensive than predicted because of aggressive interest rate hikes

The Federal Reserve's monetary policy belt-tightening has finally started to affect Tesla's car financing terms as well. While Tesla's banking partners held out without raising its interest rates for a long time, at the start of Q4 they have gone up to 4.74%. Granted, it's just a 0.25% increase from the previous 4.49% rate, but they will probably continue rising in lockstep with the Fed's actions.

Thus, Tesla buyers can expect to pay US$724 a month to finance a US$45,000 Model 3 over the course of a typical 72-months loan with a US$4,500 down payment, as you can see from the example tweeted below. Since there are plenty of competing lenders for car loans and a tangible collateral, vehicle financing is easy to come by and is somewhat inflexible compared to the Fed's rate hikes, moving in sync with them, but in a narrower band.

Last year, Bankrate's Chief Financial analyst Greg McBride predicted that car loan rates will rise in 2022 but won't go as high as, say, home financing:

Rates for auto loans haven’t been very rate sensitive in recent years, and this was especially true in the 2015-2019 cycle of Fed rate hikes. Competition among lenders means much the same will play out this time. Rates will move up, but not quite as much as the Fed hikes rates.

Still, his prediction was that the "average interest rate on a five-year new car loan will be 4.4 percent and the average rate for a four-year used car loan will be 4.85 percent" at the end of this year, while Tesla's financing terms are now already 4.74%, even on a six-year loan, yet the Fed's tightening policy has been more aggressive than expected, too. 

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