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New research shows that a growing percentage of car buyers are taking part in monthly loan payments of $1,000 or more amid rising interest rates and higher auto prices.
Overall, 14.3% of consumers who financed a new car in the third quarter committed to paying that amount or more, up from 8.3% during the same period last year, according to Edmunds. For electric car buyers, this share is 26%; For hybrids 24%.
“High prices and rising interest rates are making consumers one-to-two with monthly payments into a new world,” said Jessica Caldwell, executive director of Edmunds Statistics.
Edmunds data showed the interest rate on new auto loans came to 5.7%, compared to 4.3% a year ago. and with the Federal Reserve It is expected that it will continue to raise interest rates to fight its continuation inflationCar loan rates can go up.
The average price of a new car is close to 46 thousand dollars
The median price paid for a new car in the third quarter was $45,971, it said Estimation From JD Power and LMC Automotive. While there are signs that the market is cooling, that sticker price is 10.3% higher than the same period in 2021.
What is more sales incentives than Manufacturers, which usually results in a lower overall price, was minimal. In September, the average discount was about $936, down 47.8% from the previous year, according to JD Power/LMC estimates.
“Lack of inventory, combined with strong demand, continues to allow manufacturers to maintain a low level of discounting,” said Thomas King, head of data and analytics at JD Power.
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The persistent shortage of inventory is also partly responsible for the price hike, as well as changing consumer preferences.
“We’ve seen Americans adopt a ‘bigger is better’ mentality by gravitating toward larger vehicles,” Caldwell said, adding that these cars also come with expensive amenities and advanced technologies.
Trade values can help reduce loan amounts
If you can, take advantage of the turnover in your used car.
King said the increase in monthly payments would be greater if not for the higher trade-in values of used cars for buyers. The average trade value for September was $9,617, up 21.7% from a year ago.
While used car prices are dropping, they’re still 33% — or $8,810 — higher than they would have been if a typical decline occurred over the past two years, according to CoPilot, a car shopping app.
For buyers, although there may be less room to negotiate amid ongoing inventory challenges, another way to keep your payment low is to get the best possible interest rate by getting good credit score.
While it’s hard to know what credit score a lender will use (they have options), having an overall goal of avoiding hits on your credit report helps your score no matter which company it uses, experts say.
Some of the easiest ways Increase your credit score Including checking your credit report for errors and keeping your open accounts in good standing – the latter means you need to pay all of your credit bills on time and in full each month,” said Jill Gonzalez, analyst and spokesperson for personal finance site WalletHub.
“You can also improve your score by keeping unused accounts open, as this helps build a long credit history, which is essential for a good credit score,” she said.
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