Average monthly car payment hits record high of $712

A person walks past a car dealership on June 10, 2022 in New York City.  The Labor Department said Monday that consumer prices rose 8.6% last month from a year earlier.  Inflation has reached its highest level in four decades, driving up the cost of airfare, hotels, vehicles, gasoline and food.

A person walks past a car dealership on June 10, 2022 in New York City. The Labor Department said Monday that consumer prices rose 8.6% last month from a year earlier. Inflation has reached its highest level in four decades, driving up the cost of airfare, hotels, vehicles, gasoline and food.
Image: Photo by Spencer Platt (Getty Images)

The average monthly car payment in May jumped to an incredible $712, according to Moody’s Analytics, thanks to inflation, inventory shortages and increased demand.

As Moody’s recounted ABC News that prices could soon drop — prices rose only one percent in May compared to March — other industry experts say it could be years before supply increases and prices fall. Interest rates on auto loans rose another eight basis points. With the Fed announcing the highest interest rate hike in 20 years this week, getting a car loan is an even more expensive endeavor going forward.

So there’s this old chestnut of supply and demand: familiar supply chain disruptions and occasional plant shutdowns due to COVID-19 spikes kept dealer inventory on a leash. The war in Ukraine did not help either.

New cars are now 26% more expensive than before the pandemic and 19% more expensive than just a year ago, according to Moody’s. Automakers and dealerships really have no incentive to cut costs when their products are both in high demand and in limited supply. They might not never go back to business as usual. From the ABC:

A report by Moody’s Analytics found that typical monthly car payments hit an all-time high of $712 in May. Kelley Blue Book data showed new vehicle prices averaged $47,148 in May, the second highest on record.

Vehicle affordability has deteriorated further due to rising interest rates and rising car prices, according to a recent report by Cox Automotive & Moody’s Analytics vehicle affordability index report. The report states that “the estimated typical monthly payment increased by 1.7% to $712”, which is a new record high for monthly payments.

It would cost 41.3 weeks of median income to buy a new vehicle, which is a jump of 19% from May 2021, according to the report.

There is of course a caveat: the increase in average prices is partly due to increased demand for luxury vehicles. Last December, the average cost of a luxury vehicle was $64,864. Six months later, it has risen to $65,379, with buyers paying an average of $1,071 above the list price, according to ABC.

Luxury or not, it looks like the fragile economy is catching up with some car buyers who may have bitten off more than they could chew. Ford Chief Financial Officer John Lawler told a crowd at the World Automotive Conference on Wednesday that the automaker was seeing an increase in loan delinquencies, according to Automotive News:

“We’re seeing headwinds around delinquencies as perhaps a leading indicator.”

Still, he said the rise was not yet cause for concern, as crime rates have been at historic lows for about last year.

“It looks like we’re going more towards the average,” Lawler said.

It’s not just new cars that are increasing in price. We reported used car prices have increased by 40% compared to last year in February, aaverage between $28,000 and $29,500. If you’re looking to get the best price on a used car even in this economy, our car buying guru Tom McParland has some useful tips.

Comments are closed.