Monthly car loan payments hit record high, those paying $1,000 a month DOUBLE in a year
Monthly car loan payments hit record high, those paying $1,000 a month DOUBLE in one year
- The percentage of people taking out new car loans and paying $1,000 in monthly payments has nearly doubled from 7% to 12.7% in the past 12 months
- Average monthly payments on new car loans hit record high of $686
- Used car market sees average monthly payments at $554, up 12% year over year
- Pandemic-related supply chain issues are partly to blame, with shortages of new cars driving price hikes on the forecourt
- Monthly interest payments also rose after the Federal Reserve raised rates
Record numbers of Americans are paying at least $1,000 a month to finance their new cars as interest rates soar and supply chain issues are caused by the pandemic.
At least 12.7% of new-car buyers who took out loans last month are making monthly payments of at least $1,000, according to car-buying site Edmunds.
At this time last year, the figure was closer to 7%. In 2019, the level was closer to 5%. More than ten years ago, in June 2010, only 2% paid such sums.
Monthly car loan payments are also at an all-time high with the June average at $686. This figure is up 4% from January this year and 13% from July 2021.
A record 12.7% of new car buyers who took out loans last month are making a monthly payment of at least $1,000. In 2019, the level was closer to 5%. In 2013, less than 2% paid such sums. Source: Edmunds
Monthly car loan payments are also at an all-time high with the June average at $686. In the used car market, the average monthly payment was $554 per month. Source: Edmunds
Things aren’t looking much better in the used car market either, with average monthly payments also at near record highs. In June, the average monthly payment for a used car was $554, up 12% from the same time last year.
The cost of buying a new vehicle is much higher than before the pandemic, due to pandemic-related supply chain issues that have created a shortage of new cars.
Meanwhile, interest payments also rose after the Federal Reserve raised rates.
“Low interest rates were one of the few reprieves for car buyers amid high prices and supply shortages. But the Fed’s rate hikes this year are making financial incentives much more costly for automakers, and consumers are starting to feel the pinch,” said Jessica Caldwell, executive director of information at Edmunds.
“While there seems to be a steady stream of affluent consumers willing to commit to car payments that are more like mortgage payments, for most consumers the new car market is becoming increasingly out of reach. scope.”
Prices have also risen as consumer tastes have changed, with more expensive SUVs and pickup trucks proving increasingly popular.
“It’s a go-big-or-go-home attitude when it comes to buying a car right now,” said Ivan Drury, chief information officer at Edmunds.
Customers whose leases are about to expire also find that their payments increase dramatically when they need to renew their loan and financing agreements.
“A single percentage point increase may not seem like a lot at first glance, but it’s worth hundreds, if not thousands, of dollars over the course of a loan of 72 months or more,” Drury said.
“Looking for financial incentives was less necessary in recent years when finance rates were low, but seeking lower APR offers from dealerships or third parties could make a difference in today’s market.
Still, those in the new car market often have good credit scores and a decent amount of cash for a down payment.
Buyers during the second quarter of 2022 deposited an average of $6,333, up 25% from 2021, the Wall Street Journal reports.
In an attempt to reduce monthly costs, some drivers take out loans with longer repayment terms of up to five or six years – and sometimes longer.
Although the monthly payments are lower, this could mean that buyers will end up paying more interest – likely more than the value of the car itself.