Financing the purchase of a new vehicle is becoming increasingly expensive for consumers, according to auto shopping 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 who financed a new vehicle purchase in June committed to making a monthly payment of $1,000 or more — the highest level recorded by Edmunds — compared to 7, 3% in June 2021, 4.6% in June 2019 and 2.1% in June 2010.
- The average amount financed for new vehicles reached a near-record high in the second quarter of 2022, climbing to $40,602 — from $39,726 in Q1 2022 and $36,215 in Q2 2021. Edmunds analysts note that the first and only other time the average amount financed for new vehicles exceeded $40,000 in Q4 2021, when the average APR was just 4.1%.
- An influx of luxury buyers are turning their backs on leasing and choosing to buy their new vehicles. Data from Edmunds reveals that new vehicle leasing penetration fell to 18.5% in June from 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 extra interest consumers can expect to pay over the course of a $40,000 72-month car loan. They note that switching to a 5% APR from a 4% APR would cost consumers $1,324 more in interest over the life of the loan. Switching to a 6% APR from a 4% APR would cost an additional $2,672.
“A single percentage point increase may not seem like a lot at first glance, but it adds up to hundreds, if not thousands, of dollars over the course of a 72-month (or longer) loan—a significant cost counts. held to… .