New Car Buyers Hammered By High Interest Rates, Prices

July 2, 2024 10:22 am

Following the onset of the pandemic, new car prices soared to new record heights amid dwindling inventory, high demand, and various supply chain shortages, which also had a tremendous impact on the used vehicle market, too. The new car market did start to cool off somewhat at the onset of 2024, but prices haven’t declined by much through the first half of the year, and interest rates remain high as well – creating a huge financial problem for new car shoppers.

According to new data from Edmunds, this combination of high new car pricing and interest rates is stretching buyers to their financial limits, even as inventory improves and discounts return. The company’s latest analysis found that the average new vehicle APR in Q2 2024 grew from 7.1 percent in Q1 to 7.3 percent, its sixth consecutive month of hovering above seven percent. Shoppers have worked to drive down monthly payments by opting for longer terms as well – 70 percent of all new vehicle loans in Q2 had a term of over 60 months, in fact – with an average of 69 months, which is the highest since the end of 2022.

The average new vehicle down payment dropped to $6,579 in Q2 as well – the lowest figure since Q3 2022 – which helped contribute to a new all-time high monthly average payment of $740 – up from $735 in Q1. Meanwhile, 17.8 percent of buyers had a monthly payment of more than $1,000 in Q2, down ever-so-slightly from the record of 17.9 percent in Q4 2023. This data is especially troublesome for younger buyers that don’t have quite as much money to spend, especially when we also factor in soaring insurance costs as well.

“High interest rates continued to be a heavy drag on new-vehicle sales growth in the second quarter,” said Jessica Caldwell, Edmunds’ head of insights. “In theory, improved inventory and growing incentives should paint a more consumer-friendly picture of the market, but the reality is most Americans can’t buy their cars with cash, and increased borrowing costs continue to be a major roadblock when buying a new vehicle.”

We’ll have more on the state of new vehicle pricing soon, so be sure and subscribe to Ford Authority for comprehensive Ford news coverage.

By Brett Foote

Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.