Research shows that many car buyers are taking home monthly loan payments of $1,000 or more.
According to Edmunds, 14.3% of buyers who financed a new vehicle in the third quarter wound up with payments of $1,000 or more. That percentage increased from 8.3% during the same period last year. Electric car and hybrid buyers have a higher percentage share of those lofty payments, at 26% and 24%, respectively.
“High prices and rising interest rates are dealing customers a one-two punch by catapulting monthly payments into a new realm,” said Jessica Caldwell, Edmund’s Executive Director of Insights.
Interest rates jumped to 5.7%, up from 4.3% a year ago, and with further rate increases from the Federal Reserve expected before the end of the year, and even into 2023, it’s likely that auto loan rates will jump even higher.
According to an estimate from J.D. Power and LMC Automotive, the average price paid for a new car in the third quarter was $45,971. That’s 10.3% higher than the same period last year. Plummeting sales incentives might have played a prominent role in those higher prices. In September, the average discount was just $936, down 47.8% from a year earlier.
“The 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 J.D. Power.
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