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The Capitalization of Consumer Financing into Durable Goods Prices

Author

Listed:
  • Bronson Argyle
  • Taylor D. Nadauld
  • Christopher Palmer
  • Ryan D. Pratt

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%.

Suggested Citation

  • Bronson Argyle & Taylor D. Nadauld & Christopher Palmer & Ryan D. Pratt, 2018. "The Capitalization of Consumer Financing into Durable Goods Prices," NBER Working Papers 24699, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24699
    Note: CF EFG ME PE
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    Cited by:

    1. Cao, June & Huang, Zijie & Liew, Millie, 2025. "The environmental-financial nexus: Centralized environmental monitoring, eco-consciousness, and green revenues," Journal of Economic Behavior & Organization, Elsevier, vol. 231(C).
    2. Olivier Darmouni & Andrew Sutherland, 2021. "Learning about Competitors: Evidence from SME Lending [Monthly payment targeting and the demand for maturity]," The Review of Financial Studies, Society for Financial Studies, vol. 34(5), pages 2275-2317.
    3. Ferrari, Alessandro & Loseto, Marco, 2023. "Liquidity constraints and demand for maturity the case of mortgages," Working Paper Series 2859, European Central Bank.
    4. Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2025. "Credit supply and house prices: Evidence from mortgage market segmentation," Journal of Financial Economics, Elsevier, vol. 163(C).

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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