The Capitalization of Consumer Financing into Durable Goods Prices
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% to 90% of the monthly payment increase. Most of this is driven b...
| Main Authors: | , , , |
|---|---|
| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2021
|
| Online Access: | https://hdl.handle.net/1721.1/130492 |
| _version_ | 1826212950764945408 |
|---|---|
| author | Argyle, Bronson Nadauld, Taylor Palmer, Christopher John Pratt, Ryan |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Argyle, Bronson Nadauld, Taylor Palmer, Christopher John Pratt, Ryan |
| author_sort | Argyle, Bronson |
| collection | MIT |
| description | 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% to 90% of the monthly payment increase. Most of this is driven by shifting toward lower-quality cars, but affected borrowers offset 20% to 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 car's price by 2.8%. |
| first_indexed | 2024-09-23T15:40:44Z |
| format | Article |
| id | mit-1721.1/130492 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T15:40:44Z |
| publishDate | 2021 |
| publisher | Wiley |
| record_format | dspace |
| spelling | mit-1721.1/1304922021-09-20T19:06:58Z The Capitalization of Consumer Financing into Durable Goods Prices Argyle, Bronson Nadauld, Taylor Palmer, Christopher John Pratt, Ryan Sloan School of Management 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% to 90% of the monthly payment increase. Most of this is driven by shifting toward lower-quality cars, but affected borrowers offset 20% to 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 car's price by 2.8%. 2021-04-21T20:15:54Z 2021-04-21T20:15:54Z 2020-10 2018-08 2021-04-01T14:54:17Z Article http://purl.org/eprint/type/JournalArticle 0022-1082 1540-6261 https://hdl.handle.net/1721.1/130492 Argyle, Bronson et al. "The Capitalization of Consumer Financing into Durable Goods Prices." Journal of Finance 76, 1 (October 2020): 169-210. © 2020 American Finance Association en http://dx.doi.org/10.1111/jofi.12977 Journal of Finance Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Wiley SSRN |
| spellingShingle | Argyle, Bronson Nadauld, Taylor Palmer, Christopher John Pratt, Ryan The Capitalization of Consumer Financing into Durable Goods Prices |
| title | The Capitalization of Consumer Financing into Durable Goods Prices |
| title_full | The Capitalization of Consumer Financing into Durable Goods Prices |
| title_fullStr | The Capitalization of Consumer Financing into Durable Goods Prices |
| title_full_unstemmed | The Capitalization of Consumer Financing into Durable Goods Prices |
| title_short | The Capitalization of Consumer Financing into Durable Goods Prices |
| title_sort | capitalization of consumer financing into durable goods prices |
| url | https://hdl.handle.net/1721.1/130492 |
| work_keys_str_mv | AT argylebronson thecapitalizationofconsumerfinancingintodurablegoodsprices AT nadauldtaylor thecapitalizationofconsumerfinancingintodurablegoodsprices AT palmerchristopherjohn thecapitalizationofconsumerfinancingintodurablegoodsprices AT prattryan thecapitalizationofconsumerfinancingintodurablegoodsprices AT argylebronson capitalizationofconsumerfinancingintodurablegoodsprices AT nadauldtaylor capitalizationofconsumerfinancingintodurablegoodsprices AT palmerchristopherjohn capitalizationofconsumerfinancingintodurablegoodsprices AT prattryan capitalizationofconsumerfinancingintodurablegoodsprices |