Keywords
loan maturity, consumer response, car prices
Abstract
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 o set 60-90% of the monthly payment increase. Most of this is driven by shifting toward lower quality cars, but affected borrowers are able to o set 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%.
Original Publication Citation
“The Capitalization of Consumer Financing into Durable Goods Prices” with Taylor Nadauld, Christopher Palmer, and Ryan Pratt. Journal of Finance, February 2021.
BYU ScholarsArchive Citation
Argyle, Bronson; Nadauld, Taylor D.; Palmer, Christopher; and Pratt, Ryan D., "The Capitalization of Consumer Financing into Durable Goods Prices" (2018). Faculty Publications. 8951.
https://scholarsarchive.byu.edu/facpub/8951
Document Type
Peer-Reviewed Article
Publication Date
2018
Publisher
Journal of Finance
Language
English
College
Marriott School of Business
Department
Finance
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