More car buyers are paying at least $1,000 a month for their loan as high prices and rate hikes are ‘a punch in two’ – NBC New York
- For electric and hybrid vehicles, the share of car buyers paying more than $1,000 per month is higher than for gas-powered cars.
- The average price paid for a new car in the third quarter was $45,971, according to an estimate from JD Power and LMC Automotive.
- Although there are signs that the market is cooling, this amount is 10.3% higher than the same period in 2021.
A growing share of car buyers are signing up for monthly payments of $1,000 or more amid rising interest rates and high auto prices, a new study finds.
Overall, 14.3% of consumers who financed a new vehicle in Q3 committed to making payments equal to or greater than that amount, up from 8.3% during the same period in 2021, according to Edmunds. . For buyers of electric vehicles, the share is 26%; for hybrids, 24%.
“High prices and rising interest rates are giving consumers a boost by catapulting monthly payments into a new realm,” said Jessica Caldwell, chief information officer at Edmunds.
The interest rate on new auto loans hit 5.7%, from 4.3% a year ago, according to data from Edmunds. And with the Federal Reserve should continue to raise interest rates to combat the persistence inflationauto loan rates could be even higher.
The average price paid for a new car is nearly $46,000
The average price paid for a new car in the third quarter was $45,971, according to an estimation from JD Power and LMC Automotive. Although there are signs that the market is cooling, this amount is 10.3% higher than the same period in 2021.
Contributing to these higher prices, incentives to sell manufacturers are minimal. In September, the average discount was around $936, down 47.8% from a year earlier, according to JD Power/LMC’s estimate.
“Lack of inventory, coupled with strong demand, continues to allow manufacturers to maintain a low level of discounting,” said Thomas King, president of the data and analytics division at JD Power.
Continued inventory shortages are also partly responsible for the high prices, as have consumer preferences that have changed over the past decade.
“We’ve seen Americans adopt a bigger-is-better mindset by turning to larger vehicles,” Caldwell said, adding that these cars also come with more comfort and advanced technologies, which cost more.
Trade-in values help reduce loan amounts
If you can, take advantage of the trade-in value of your used vehicle.
The increase in monthly payments would be greater without buyers’ higher used-car trade-in values, King said. The average trade-in value for September was estimated at $9,617, up 21.7% from a year ago.
While used car prices are falling, they’re still 33% — or $8,810 — higher than they would be if typical depreciation had occurred over the past two years, according to CoPilot, an app for buying cars.
For buyers, while there may be less negotiating room in the face of ongoing inventory issues, another way to lower your payment is to get the best interest rate possible by having a good credit score.
While it’s hard to know what credit score a lender will use – they have options – having a general goal of avoiding bumps on your credit report helps your score no matter which one you use, experts say .
“Some of the easiest ways to boost your credit score include checking your credit report for errors and keeping your open accounts in good standing – the latter means paying all your credit bills on time and in full every month,” said Jill Gonzalez, analyst and gatekeeper. -word of personal finance website WalletHub. .
“You can also improve your score by keeping unused accounts open, as this helps build a long credit history, which is essential for a good credit score,” she said.