VW raises loan interest rate to 4.7% APR

VW raised its best interest rate to 4.7% APR in a price increase that could disappoint new-car buyers ahead of the Memorial Day holiday. The move came a day before the Federal Reserve’s latest interest rate hike and could significantly increase the cost of buying a new Volkswagen car or SUV in May.

The interest rate presented by VW is now 4.7% APR for up to 60 months. According to an incentive bulletin sent to dealers yesterday, the tariff applies to all 2022 gasoline-powered vehicles. In April, the best rate was 4.31%, preceded by an APR of 3.36% in March. A year ago, our records show the rate was 0% for 60 months.

Compared to VW’s finance deals this time a year ago, we estimate the latest rate effectively translates to a $3,700 price increase in the cost of buying a $30,000 car. Curiously, the 4.7% rate is higher than the company’s luxury brand. For reference, the 2022 Audi A5 offers rates as low as 2.49% for 5 years.

But that’s not all. VW Credit allows dealers to mark up these so-called standard rates by up to 1%. In addition, choosing a longer loan will imply a significantly higher rate. Even with Tier 1 credit (in VW’s case, a FICO of 740 or higher), that would imply a rate of 5.45%. And that’s before a dealer markup.

So far, there doesn’t seem to be any relief in sight for VW buyers looking to strike a deal. Faced with a shortage of chips affecting production, VW does not even advertise leases on its website. Therefore, getting VW’s lease prices or finance rates under control could prove to be much more difficult than buyers are used to.

VW isn’t the only brand to raise interest rates. As we reported earlier, Hyundai now has higher rates than Genesis, and we are also seeing rate hikes from Infiniti as well as interest rate hikes from Honda. Even Tesla raised interest rates. The changes could cause some consumers to wait for market conditions to improve.

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