The Capitalization of Consumer Financing into Durable Goods Prices
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%.
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Copy CitationBronson Argyle, Taylor D. Nadauld, Christopher Palmer, and Ryan D. Pratt, "The Capitalization of Consumer Financing into Durable Goods Prices," NBER Working Paper 24699 (2018), https://doi.org/10.3386/w24699.Download Citation
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Non-Technical Summaries
- When prospective buyers have access to longer-term loans with lower monthly payments, the transaction prices for automobiles increase...
Published Versions
BRONSON ARGYLE & TAYLOR NADAULD & CHRISTOPHER PALMER & RYAN PRATT, 2021. "The Capitalization of Consumer Financing into Durable Goods Prices," The Journal of Finance, vol 76(1), pages 169-210. citation courtesy of 
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