The Capitalization of Consumer Financing into Durable Goods Prices / Bronson Argyle, Taylor D. Nadauld, Christopher Palmer, Ryan D. Pratt.

Format:

Book

Author/Creator:

Argyle, Bronson.

Contributor:

National Bureau of Economic Research.

Nadauld, Taylor D.

Palmer, Christopher J.

Pratt, Ryan D.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24699.

NBER working paper series no. w24699

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Using loan-level data on millions of used-car transactions across hundreds of lenders, we study the consumer response to exogenous variation in credit terms. Borrowers offered shorter maturity decrease expenditures enough to offset 60-90% of the monthly payment increase. Most of this is driven by shifting toward lower quality cars, but affected borrowers are able to offset 20-30% of a monthly payment shock by negotiating lower prices for equivalent cars. Our results suggest that durable goods prices adjust to reflect credit terms even at the individual level, with one year of additional loan maturity increasing a given car's price by 2.8%.

Notes:

Print version record

June 2018.