Americans are not just feeling the pain at the pump, but now even when purchasing and insuring a new car.
Monthly payments for new cars reached monthly mortgage payment levels of as much as $1,000 in June. This is the highest level that car research site Edmunds has on record. Nearly 13%, 12.7%, of new vehicle owners are signing contracts for monthly payments of $1,000 or more. Last year, only 7.3% of people were paying that much.
The average annual percentage rate (APR) on new financed vehicles in the second quarter of 2022 climbed 5% for the first time since the first quarter of 2020.
As prices increase, payment terms are also extending to longer periods of time, with 36.1% signing on for commitments of 73-84 months, i.e. six to seven years, up from 32.1% in 2021.
New car prices are also climbing the scales, boosting the average vehicle loan to $40,602 in the second quarter, up from $36,215 a year ago. It is now going to cost you more than $47,000, on average, to buy a new car.
Meanwhile, luxury car shoppers are turning their backs on leasing and choosing, instead, to purchase their new vehicles, with new vehicle leases falling to 18.5% in June from 30.5% in June 2019.
“Low interest rates used to be one of the few reprieves for car shoppers amid elevated prices and supply shortages,” says Jessica Caldwell, Edmunds’ director of insights. “But the Fed rate hikes this year are making finance incentives far costlier for automaters, and consumers are starting to feel the pinch. For most car consumers, the new car market is growing increasingly out of reach.”
Ivan Drury, Edmunds’ senior manager of insights adds: “A single percentage point increase might not seem like much at first blush, but that adds up to hundreds, if not thousands, of dollars over the course of a 72-month, or longer, loan.”
Drury says it has become more important than ever for car shoppers to seek out competitive APR offers from dealers: “The best moves shoppers can make are staying as informed as possible and not relying on car financing strategies of old, because buying a car in 2022 is a whole different ball game.”
On top of the rising price of purchasing a car, auto insurance prices have also climbed, to an average of $1,858 a year, according to Bankrate.com.
Edmunds has an auto loan calculator that can help car consumers figure out what might be the best deal for them.
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