How Much Are Car Purchases Driven by Home Equity Withdrawal?

Brett McCully, Karen Pence and Daniel J. Vine

Journal of Money, Credit and Banking, 2019, vol. 51, issue 5, 1403-1426

Abstract: Previous research indicates that changes in housing wealth affect consumer spending on cars. We find that home equity extraction plays only a small role in this relationship. Consumers rarely use funds from equity extraction to purchase a car directly, even during the mid‐2000s’ housing boom; this finding holds across three nationally representative household surveys. We find in credit bureau data that equity extraction does lead to a statistically significant increase in auto loan originations, consistent with equity extraction easing borrowing constraints in the auto loan market. This channel, though, accounts for only a tiny share of overall car purchases.

Date: 2019
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https://doi.org/10.1111/jmcb.12595

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Working Paper: How Much Are Car Purchases Driven by Home Equity Withdrawal? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:51:y:2019:i:5:p:1403-1426

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