Rate Cut—How Much Does It Help?
Wednesday, September 17th, the Federal Reserve announced a .25% cut to the federal funds rate. The first drop in rates we've seen this year.
While a cut like this is generally beneficial to our space and the clients we work with, the actual dollars and cents of a rate change like this often doesn't move the needle as much on equipment acquisitions as many are led to believe. At least not in the raw numbers.
Let’s consider an example. Suppose you're in the market for a $100K piece of gear and on Tuesday you could have been approved for a 9% rate, but now you can get that money at 8.75%. What’s the difference in hard dollars?
On a 60 month term, about $12 per month. That’s it. A few Starbucks trips.
Now, we certainly welcome any opportunity for our clients to save money, and the broader interest rate environment probably affects your business in a multitude of other important ways.
However, when it comes to deciding how to properly time equipment upgrades, there are almost certainly weightier factors to consider than the Fed’s most recent or next potential rate move. Those are the factors which are unique to your business situation such as the potential added revenue from new machinery, tax goals as year end approaches, the availability of desired equipment, ect.
Whether you're actively in shopping mode or simply brainstorming future expansion, we're always ready to discuss ideas. Our goal is to be an asset in thinking through equipment procurement in a strategic fashion.
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