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New-Vehicle Purchase Impact Breaks Records

Consumers paying more and more as interest rates stretch costs to new highs.

April 3, 2023
New-Vehicle Purchase Impact Breaks Records

Over 12% of borrowers went with 36- or 48-month loan terms in the first quarter, the highest since the fourth quarter of 2009.

IMAGE: Pixabay/Rauten-Kauf

2 min to read


The average annual percentage rate for new-car financing has reached a 15-year high, Edmunds says.

The first-quarter average hit 7%, the highest rate since the same quarter in 2008.

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One bright spot is that the latest average was flat in March after 14 consecutive months of increases. Edmunds credited that to a small uptick in manufacturer financing subsidies.

The quarter’s average monthly new-car payment, though, hit a record high of $730, up year-over-year from $656, Edmunds said. It noted another record in the percentage of people financing a new car with a monthly payment of at least $1,000: 16.8%. That was up year-over-year from 10.3%.

Meanwhile, the average down payment for new models was also a record for the quarter at $6,956.

Dealers can try to make the best of the situation by tying their marketing to incentives and interest rates, said Edmunds Executive Director of Insights.

“Since interest rates are at the forefront of consumers' minds, any automaker or dealer that can advertise incentives related specifically to interest rates will likely get more attention,” she said in a press release. “This could be a powerful marketing tool that would enable sellers to tap into the significant pent-up demand that has been building over the past few years and convert that demand into actual sales."

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The higher rates and monthly payments mean that more vehicle buyers are opting for longer loan terms to make their purchases better fit their budgets, Edmunds said.

“More car shoppers are being pushed to the extreme ends of the finance terms spectrum,” its quarterly report said.

It noted that 12.3% of borrowers went with 36- or 48-month loan terms in the first quarter, the highest since the fourth quarter of 2009, and that most consumers are extending loan terms out as much as possible.

LEARN MORE: Fed Continues Interest Rate Increases

 

Originally posted on Auto Dealer Today

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