Auto loan interest rates climb to highest level since 2019 in third quarter, Edmunds says

Analysts say more consumers are opting for shorter loan terms to take advantage of the limited financial incentives offered by automakers

SANTA MONICA, Calif., October 3, 2022 /PRNewswire/ — Consumers are digging deeper into their pockets to finance new vehicles, according to car buying experts at Edmunds. New data from Edmunds reveals:

  • The average annual percentage rate (APR) on new vehicles financed in Q3 2022 climbed to 5.7% for the first time since Q3 2019.
  • The average amount financed for new vehicles reached an all-time high in the third quarter of 2022, climbing to $41,347 – compared to $40,602 in Q2 2022 and $38,315 in the third quarter of 2021.
  • The average monthly payment remained higher $700 every month in Q3.
  • 14.3% of consumers who financed a new vehicle purchase in Q3 2022 committed to a monthly payment of $1,000 or more – the highest level recorded by Edmunds – compared to 12.2% in the second quarter of 2022 and 8.3% in the third quarter of 2021.

“High prices and rising interest rates are giving consumers a punch by catapulting monthly payments into a new realm,” said Jessica Caldwell, executive director of Edmunds Ideas. “With new vehicle purchases, automaker subsidies offer some relief, but even those are far less generous than before. Consumers heading into the auto market may be aware of high prices, but should also prepare for a different experience in the F&I office.

Edmunds analysts note an uptick in shorter loan terms in the third quarter, which they say reflects more car buyers taking advantage of subsidized interest rates offered by automakers. Edmunds data shows 9.3% of financed new car purchases had an average loan term of 48 months or less in Q3 2022, compared to 4.5% in Q3 2020, when interest rates were low and longer loan terms were a carrot for pandemic-weary buyers.

Edmunds analysts calculated how much extra interest a consumer could expect to pay on a $40,000 car loan over 72 months at 5% APR against 36 months at 1.9% APR. They note that going from 5% APR at 72 months to 1.9% APR at 36 months would increase the monthly payment by $500 at $1,144 but would save a consumer $5,200 in interest paid globally.

“Most car buyers tend to be narrow-minded when it comes to their monthly payments and their knee-jerk reaction is to lengthen their loan terms to make more expensive purchases a little more palatable, but that’s a huge risk to take when cars are already selling above MSRP and interest rates are so high,” said Ivan Drury, director of Edmunds ideas. “Consumers who want to save where they can need to think about the big picture when it comes to financing their car purchase. Accepting a much larger monthly payment can be hard to swallow. high, but if your ultimate goal is to save money and stay out of the red, you could save thousands of dollars by taking this step – just make sure the monthly payment you accept is still within your means. “

Note: Edmunds analysts have adjusted their auto finance data cleaning process to include new and used monthly payments up to $2,000 (previously the limit was $1,500) to take market developments into account. Going forward, this new limit will apply to the reported financial figures of January 2020 and may create minor discrepancies with previously reported figures.

Quarterly new car financing data
(Averages)


2022 Q3

2021 Q3

2022 Q2

Term

70.3

69.8

70.3

Monthly payment

$703

$630

$678

Amount financed

$41,347

$38,315

$40,602

APR

5.7%

4.3%

5.0%

Advance payment

$6,453

$5,467

$6,333

Quarterly data on used car financing
(Averages)


2022 Q3

2021 Q3

2022 Q2

Term

70.9

69.6

70.8

Monthly payment

$565

$506

$555

Amount financed

$31,366

$28,969

$31,448

APR

9.0%

7.4%

8.2%

Advance payment

$3,700

$3,536

$3,658

About Edmunds
Edmunds guides online car buyers from research to purchase. With in-depth reviews of every new vehicle, buying advice from an in-house team of experts, and a wealth of consumer and automotive market information, Edmunds helps millions of buyers select , price and buy a car with confidence. Rated one of America’s Best Workplaces by Fortune, Great Place to Work and Built In, Edmunds is based in Santa Monica, California. follow us on Twitter, Facebook and instagram.

CONTACT:
Talia James Armand
Director, PR and Communications
[email protected]
310-309-4900
http://edmunds.com/about/press

SOURCE Edmunds

Comments are closed.