Thanks to skyrocketing new vehicle prices, buyers have been dishing out more per month to finance their rides than ever before over the past few years, with the percentage of $1,000+ monthly payments reaching an all-time high back in April, while new car payments hit a new record high in June as well. While average transaction pricing has declined somewhat in 2023, rising interest rates have more than made up for that little bit of relief, helping to keep new car payments inflated, particularly when combined with dealer markups. Thus, it should come as no surprise that new car payments once again hit a record high in Q2, according to new data from Edmunds.
For starters, the number of customers who financed a vehicle with a monthly payment of $1,000 or more set its own new record in Q2 at 17.1 percent, up from 16.8 percent in Q1 and just 4.3 percent in the second quarter of 2019. At the same time, the average new car payment came in at $733, a bit more than $730 in Q1 and $678 in 2019.
According to Edmunds, 64.5 percent of new car shoppers signed up for an average loan-term range of between 67 and 84 months and an average APR of between 8.5 percent and 9.6 percent in Q2 2023, while 15.6 percent signed up for loan term lengths between 31 and 48 months and a two percent to 4.8 percent APR – the more savvy bunch of the group. On the bright side, the average amount financed came in at $40,356 in Q2, which was actually lower than $40,468 in Q1 and $40,602 in Q2 2022. Unfortunately, given the current economic environment, it doesn’t seem as if much relief is coming in the short term, however.
“The double whammy of relentlessly high vehicle pricing and daunting borrowing costs is presenting significant challenges for shoppers in today’s car market,” said Ivan Drury, Edmunds’ director of insights. “The Federal Reserve’s recent pause in interest rate hikes unfortunately didn’t offer much relief for consumers, and hints at further raises later this year mean auto loan rates could even continue to increase.”