The Capitalization of Consumer Financing into Durable Goods Prices

Bronson Argyle (), Taylor D. Nadauld, Christopher Palmer and Ryan D. Pratt

No 24699, NBER Working Papers from National Bureau of Economic Research, Inc

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 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%.

JEL-codes: E31 E43 E51 G21 H22 L11 L62 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-mac
Note: CF EFG ME PE
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Citations: View citations in EconPapers (1)

Published as 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.

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Journal Article: The Capitalization of Consumer Financing into Durable Goods Prices (2021)
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