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Over 12% of New Car Payments Top $1000 Per Month

Over 12% of New Car Payments Top $1000 Per Month
  • More and more new car buyers are financing their purchases and paying more than $1000 per month. Data from Edmunds revealed that 12.7 percent of all new car loans in June 2022 came with four-digit payment plans.
  • You can probably guess the reasons: inflation and a limited supply of new vehicles have led to high new car prices, resulting in these higher monthly payments.
  • To cope with the high cost of new cars, car buyers are taking out longer loans and accepting higher annual percentages.

    As the average prices of new cars just keep going up, up, up, so does the number of people accepting monthly payments over $1000 a month. It’s shocking, but it’s not surprising.

    This tidbit comes to us from a June data analysis just released by Edmunds, which showed that a record 12.7 percent of new car buyers took out car loans with monthly payments in excess of $1,000. Edmunds said this is the highest level on record, with a four-digit payment rate in June of 7.3 percent in 2021, 4.6 percent in 2019 and just 2.1 percent in 2010.

    Earlier this month, we noted that the average monthly payment for new cars in the US was somewhere around $650 to $700, which was to be expected given that the average price of a new car reached $47,148 in May, according to KBB. Figures from the US Bureau of Labor Statistics show that new car prices have risen 12.6 percent in the past year.

    There is other evidence of changes in our car buying habits as a result of the high prices in the industry in the Edmunds data. In the second quarter of 2022, the average annual percentage rate (APR) on newly financed vehicles was 5 percent. It hadn’t been this high since the first quarter of 2020. Another indicator is that more new car buyers (36.1 percent) are opting for longer loan terms from 73 to 84 months than the 32.8 percent who did so in June 2021.

    Also, the average total amount financed by new car buyers nearly hit record highs in the quarter, rising to $40,602, compared to the average of $39,726 in the first quarter of this year and $36,215 in the second quarter of 2021. Edmunds said that the only other time the average exceeded $40,000 was in the fourth quarter of 2021, at which time the average APR was 4.1 percent.

    Higher APRs mean a larger total redemption amount. Edmunds said that with a 72-month auto loan for $40,000, going from a 4 percent APR to 5 percent increases the total cost by $1324, while signing up for a 6 percent APR (compared to 4 percent) means you’ll have to pay more. Pays $2,672 more over the course of the loan.

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