On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates
Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
How Much Are Car Purchases Driven by Home Equity Withdrawal?
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.
Cite this item
Brett McCully & Karen M. Pence & Daniel J. Vine, How Much Are Car Purchases Driven by Home Equity Withdrawal?, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2015-106, 01 Dec 2015, revised 24 Oct 2018.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Keywords: Auto loans; Auto sales; Cash-out refinancing; Home equity; Home equity lines of credit; Mortgage refinancing; Motor vehicles
This item with handle RePEc:fip:fedgfe:2015-106
is also listed on EconPapers
For corrections, contact Ryan Wolfslayer ()