The affordability crisis continues to surge in the automotive industry and remains a hot topic amongst dealers and consumers.
According to the latest information from Edmunds, nearly 1 in 5 new-car shoppers committed to a whopping $1,000 or more monthly payments in Q4 2024. These staggering payments have hit an all-time high. Despite improving factors like the Fed’s recent interest rate cuts, affordability remains a sore spot for most consumers.
In the fourth quarter of 2024, 18.9% of new car buyers committed to monthly payments of $1,000 or more.
Edmunds also noted that new car shoppers are taking out bigger loans, with the average amount financed rising to an all-time high of $42,113. This staggering increase is a $1,400 jump from the average of $40,713 in Q3.
In addition, it’s nearly impossible for consumers to find or qualify for 0% financing deals. A dismal 2.4% of all newly financed vehicles in Q4 were at 0%. Even if consumers found a 0% finance offer, they’d have to have excellent credit to qualify, which is a challenge for most consumers.
Despite the Fed’s recent rate cuts, interest rates remain at a historical all-time high. However, there are indicators that the market conditions are slowly improving. In Q4, new-car loans’ average annual percentage rate (APR) dropped to 6.8% from Q3’s 7.1%. In addition, APRs also fell to 7.8% in Q4 for long-term loans (67+ months), a much-anticipated reprieve from the 8%+ rates that have persisted since mid-2023.
However, despite the slight improvements in the market, purchasing a new vehicle continues to be out of many consumers’ budgets.
“What’s happened is new cars have become kind of the domain of the wealthy,” Karl Brauer, executive analyst at iSeeCars.com, stated in a previous interview with CBT News, “A lot of middle-class people who used to consider themselves new car shoppers, they’re buying used now.”
Car shoppers seeking affordable options should consider used cars, certified pre-owned vehicles, or EV leases as the best current choices.
