Edmunds says record share of new car buyers hit monthly payment of more than $1,000 in June

Average amount financed for new vehicles higher $40,000 in Q2

SANTA MONICA, Calif., June 30, 2022 /PRNewswire/ — Financing a new vehicle purchase is becoming increasingly expensive for consumers, according to car buying experts at Edmunds. New data from Edmunds reveals:

  • The average annual percentage rate (APR) on new vehicles financed in Q2 2022 increased to 5% for the first time since Q1 2020.
  • 12.7% of consumers having financed the purchase of a new vehicle in June 2022 committed to a monthly payment of $1,000 or more – the highest level recorded by Edmunds – compared to 7.3% in June 20214.6% in June 2019 and 2.1% in June 2010.
  • The average amount financed for new vehicles reached a near record level in the second quarter of 2022, climbing to $40,602 – compared to $39,726 in Q1 2022 and $36,215 in the second quarter of 2021. Edmunds analysts note that the first and only other time the average amount financed for new vehicles exceeded $40,000 was in the fourth quarter of 2021, when the average APR was only 4.1%.
  • An influx of luxury buyers are turning their backs on leasing and choosing to buy their new vehicles. Edmunds data reveals that new vehicle leasing penetration fell to 18.5% in June 2022compared to 30.5% in June 2019.

“Low interest rates were one of the few reprieves for car buyers amid high prices and supply shortages. But the Fed’s rate hikes this year are making financial incentives much more costly for automakers, and consumers are starting to feel the pinch,” said Jessica Caldwell, executive director of Edmunds Ideas. “While there seems to be a steady stream of affluent consumers willing to commit to car payments that are more like mortgage payments, for most consumers the new car market is becoming increasingly out of reach. scope.”

To help guide car buyers, Edmunds analysts have calculated how much additional interest consumers can expect to pay during a $40,000, 72 month car loan. They note that moving to a 5% APR from a 4% APR would cost consumers $1,324 more interest during the term of the loan. Moving to 6% APR from 4% APR would cost $2,672 After.

“A single percentage point increase may not seem like a lot at first glance, but it’s hundreds or even thousands of dollars over the course of a 72 month (or longer) loan – a significant cost given that consumers are funding as much as ever,” said Ivan Drury, senior director of knowledge at Edmunds. “Looking for financial incentives was less necessary in recent years when finance rates were low, but seeking lower APR offers from dealerships or third parties could make a difference in today’s market.”

Edmunds analysts also note that consumers are opting for longer-term loans to make monthly payments more palatable. Edmunds data reveals that 36.1% of consumers who financed the purchase of a new car in June 2022 opted for a loan term of between 73 and 84 months, compared to 32.8% in June 2021.

“Consumers are exploring all possible avenues to make their next vehicle purchase affordable, and longer loan terms are a good example of this, even if this choice presents risks given the wear and tear on the vehicle and a greater large negative equity (the amount by which their loan balance exceeds the value of their vehicles) as their vehicle ages,” Drury said. “The best choices buyers can make are to stay as informed as possible and not not rely on old car financing strategies, because buying a car in 2022 is a whole different ball game.”

Edmunds experts advise consumers to calculate the total amount they plan to finance on their next purchase using the Edmunds car loan calculatorwhich takes into account sale price, tax rates, title and registration, trade-in values, financing terms and more.

Note: Edmunds analysts have adjusted their auto finance data cleaning process to include new and used monthly payments up to $2,000 (previously the limit was $1,500), to take market developments into account. Going forward, this new limit will apply to the reported financial figures of January 2020 and may create minor discrepancies with previously reported figures.

Quarterly new car financing data

(Averages)


2022 Q2

2021 Q2

2022 Q1

Term

70.3

69.8

69.8

Monthly payment

$678

$597

$656

Amount financed

$40,602

$36,215

$39,726

APR

5.0%

4.5%

4.4%

Advance payment

$6,333

$4,981

$6,083

Quarterly data on used car financing

(Averages)


2022 Q2

2021 Q2

2022 Q1

Term

70.8

68.9

70.4

Monthly payment

$555

$478

$542

Amount financed

$31,448

$26,963

$30,994

APR

8.2%

7.8%

7.8%

Advance payment

$3,658

$3,620

$3,604

About Edmunds

Edmunds guides online car buyers from research to purchase. With in-depth reviews of every new vehicle, buying advice from an in-house team of experts, and a wealth of consumer and automotive market information, Edmunds helps millions of buyers select , price and buy a car with confidence. Rated one of America’s Best Workplaces by Fortune, Great Place to Work and Built In, Edmunds is based in Santa Monica, California. follow us on Twitter, Facebook and instagram.

CONTACT:
Michael Paul
PR and Communication Manager
[email protected]
310-309-4900
http://edmunds.com/about/press

SOURCE Edmunds

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