Impact of Interest Rates on Firms’ Performance of Heavy Commercial Vehicle Dealers in Kenya

Abstract

The objective and aim of this study were to establish the effect of interest rates on the financial performance of heavy commercial vehicle dealers. The study used a descriptive research design. The data was collected from two years before and after the announcement of interest rate capping, i.e., between 2014 and 2018. Data on sales volumes were obtained from the National Transport Safety Authority (NTSA) database by collecting data on the number of annual registrations for heavy commercial vehicles. The use of inferential statistics and descriptive statistics evaluated data. From the regression analysis, it was determined that 56.2% of the variation in sales volume of heavy commercial vehicles in Kenya could be explained by interest rate, inflation rate, and GDP as predictor variables. Findings from the regression analysis further pointed out that a model fit with the interest rate, inflation rate, and GDP as predictor variables was statistically fit to predict the sale volumes of heavy commercial vehicles in Kenya. From the regression coefficients, it was established that inflation level and interest rate had a positive impact on sales volume of heavy commercial vehicles as shown by the beta values of 0.040 and 0.220 respectively. GDP was also established to have a positive influence on sales volume as shown by the beta value of 0.307. The study recommends that various car dealers should appeal to various stakeholders to have policies and programs that would ensure that they come up with interest rate capping that is favorable to their consumers. These dealers should also ensure that they offer financing solutions that are attractive to their customers so that they don't solely rely on financing from financial institutions which could be unattractive at times. The study also recommends that the government through the CBK should come up with measures to ensure continuous growth of the economy and hence an increasing GDP. The CBK should also come up with measures to mitigate the rising levels of inflation and interest rates. This would ensure that the economy does not suffer from the adverse effects of bad interest rates and high levels of inflation.