New vehicle payments hit $736 per month as interest rates hit home
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Aïda Amer/Axios
Average new-vehicle monthly payments hit a record high in the third quarter as consumers grapple with rising interest rates.
Why it matters: Higher rates mean a higher cost of transportation, which is essential to the lifeblood of the economy.
By the numbers: The average monthly payment on a new vehicle bought in the third quarter was $736, up $33 from a year earlier, car-research site Edmunds reported Tuesday.
- The average annual percentage rate (APR) on financed new vehicles was 7.4%, up from 5.7% a year earlier.
- The average new-vehicle borrower took out $40,149 in loans.
The big picture: A spike in new-vehicle prices during the pandemic drove up monthly payments as parts shortages triggered vehicle shortages, while automakers transitioned their focus from cheaper passenger cars to more expensive SUVs and pickups.
- Now in the wake of recent Fed interest rate hikes designed to cool inflation, borrowers are getting hit with a second wave of increased vehicle costs.
- "Spiked interest rates remain the biggest impediment to affordability in both the new and used car markets today," according to Edmunds head of insights Jessica Caldwell.
Between the lines: About 17.5% of new-vehicle borrowers — more than 1 in 6 — agreed to monthly payments of over $1,000 in the third quarter, also marking an all-time high.
Yes, but: Vehicle prices have largely flattened out in 2023. In August, the average was $48,451, up only $42 from a year earlier, according to Cox Automotive's Kelley Blue Book.
What to watch: Whether the UAW strike leads to more price increases.
- If the strike tarries, it will begin to undermine inventories, potentially leading dealers to raise prices until they can get more vehicles.
- The strike "could wipe out any inroads made on inventory and the return of incentives, further elevating pricing, at least among Detroit automakers," Caldwell said.
The bottom line: Just when vehicle prices were tapering off, affordability is worsening again.
Go deeper: The under-$20,000 new car is history
(Editor's note: Cox Automotive is owned by Cox Enterprises, which owns Axios.)
