New Car Shoppers Once Again Faced High Prices In Q3 2024

New car shoppers have been facing record high prices and soaring interest rates for some time now, which has led to ever-rising lease and finance payments, too. This catastrophic rise means that a whopping one quarter of new car shoppers who financed a new vehicle in Q2 2024 with a trade-in had negative equity on those vehicles, which was the highest since Q1 2021, when that same figure was 31.9 percent. All of this is bad news for anyone in the market for a new car – particularly younger folks who don’t necessarily have big budgets – and things haven’t really improved as of late, either.

According to new data from Edmunds, in Q3, interest rates continued to hover around near-record highs – with the average new-vehicle APR coming in at 7.1 percent, the sixth consecutive quarter we’ve seen rates above seven percent and an identical match for Q2. Zero percent deals accounted for just three percent of all new car financing in the third quarter as well, and consumers continue to make up for high prices by taking on longer term loans. In fact, 69 percent of new car loans in Q3 had terms greater than 60 months, while 84-month terms came in at 18.1 percent.

All of this means that new car shoppers continue to sign up for $1,000+ monthly payments at a rapid rate – 17.4 percent in Q3 2024, which marks the sixth consecutive quarter that figure has come in above 17 percent. However, it’s worth noting that a survey conducted by Edmunds found that 62 percent of respondents indicated that they’re holding off on purchasing a new vehicle until interest rates decline.

“Q3 was unfortunately the same old story as the first half of 2024 in terms of auto financing conditions – car shoppers found little relief from the elevated interest rates and high prices, which in turn hindered new-vehicle sales growth,” said Jessica Caldwell, Edmunds’ head of insights. “The Fed’s decision to cut rates was a welcome update at the end of the quarter but, on its own, is unlikely to dramatically change the financial landscape for car buyers. Longer loan terms might make monthly payments more palatable for consumers, but the harsh reality is that most Americans don’t want to keep their vehicle for seven years. Simply put, longer loan terms put car owners at greater risk of rolling negative equity into their next auto loan.”