With the new interest rates, today, a monthly car payment can rival a mortgage payment, something never seen before in the country. That is increasingly the case due to high interest rates and high prices for new vehicles.
Analysts at car-buying site Edmunds released data Monday showing the average annual percentage rate (APR) on a new vehicle financed in the first three months rose to 7%, compared with 4.4% in the first three months. period of the previous year.
It is the highest level that has been recorded since the first quarter of 2008.
The median monthly payment for a new vehicle increased to $730 in the quarter, from $656 a year earlier.
Nearly 17% of car buyers who financed a new vehicle in the quarter agreed to a whopping monthly payment of $1,000 or more, also an all-time high.
This time last year, 10.3% of car buyers committed to that amount.
APR (The annual percentage rate of a loan) of auto loans
There is some good news. March was the first month that the APR for a new car held at 7% following 14 consecutive months of increases.
The industry has faced severe parts shortages for the past 24 months, which has tightened inventory. Tight inventory pushed prices up, creating the need for larger down payments. In the quarter, the average down payment on a new vehicle increased to $6,956 from $6,083 a year earlier.
“It takes money to save money in today’s market,” said Ivan Drury, Edmunds’ chief insights officer.
“While more automakers are offering to subsidize auto loans with lower interest rates, the problem is that most of these offers require consumers to agree to shorter loan terms of 36 or 48 months, which might discourage the people at first sight.
car financing
New car inventory is picking up, but the Federal Reserve continues to raise short-term interest rates to cool inflation, making rates now the biggest hurdle for automakers to move metals this year, he said. Jessica Caldwell, Edmunds’ chief insights officer.
“Since interest rates are at the forefront of consumers’ minds, any automaker or dealer that can announce incentives specifically related to interest rates is likely to get more attention,” Caldwell said.
Auto Loan Duration and the Down Payment Issue
According to the Kelley Blue Book site, the median transaction price for a new vehicle in February was $48,763, up 5.3% from the previous year.
Car buyers are increasingly choosing the ends of the financial spectrum to pay the high prices. The data showed that 12.3% of consumers opted for 36- or 48-month loans, and most consumers are extending loan terms even further.
In the quarter, 36% of auto loans taken were for terms of 67 to 72 months. For a car buyer who made a down payment of $6,005 and financed $41,937 at 7.7% APR, that was a monthly payment of $730. At the end of that loan, a person would pay $10,563 in interest.
About 7.6% of the loans were for 43 to 48 months. With an average down payment of $11,240 and a finance balance of $28,919 at 4% interest, the monthly payment is $655. A person would pay $2,423 in interest. The United States is no longer a cheap country.
Fuente: Free press
