Elevated new-vehicle prices and high borrowing costs are two leading factors that have new-vehicle buyers stretched to their financial limits, according to the car shopping experts at Edmunds.
Jessica Caldwell, Edmunds’ head of insights, noted these higher costs are happening despite consumers having more choices in the second quarter of 2024.
“High interest rates continued to be a heavy drag on new-vehicle sales growth in the second quarter,” said Caldwell in a press statement. “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.”
Second Quarter Numbers
For May, April and June, the average new-vehicle APR increased to 7.3 percent from 7.1 percent the previous quarter—marking the sixth consecutive quarter that new-vehicle APRs have hovered above 7.0 percent.
Edmunds data for consumers who financed new vehicle purchases in the second quarter found:
- Roughly 70 percent of new-vehicle loans had terms over 60 months in Q2 2024. The average new-vehicle loan term in Q2 2024 was 69 months, the highest point since the end of 2022 when average new-vehicle interest rates sat under 7 percent.
- The average new-vehicle down payment dropped to $6,579, the lowest mark Edmunds has seen since Q3 2022.This has contributed to the average monthly payment reaching an all-time high in Q2 2024 of $740, up $5 in the prior quarter and $7 a year ago.
- The share of consumers taking on loans with new-vehicle monthly payments of $1,000 or more was 17.8 percent in Q2 2024, just shy of the record 17.9 percent share in Q4 2023, which Edmunds analysts note is a quarter when vehicle prices are seasonally higher.
CDK Effect
Edmunds experts noted dealers being fully operational after the CDK Global ransomware attack will help consumers intent on financing a vehicle.
Ivan Drury, Edmunds’ director of insights, suggested dealers may even add incentives to make up ground on lost sales.
“While the transaction may be smoother, finding good deals still takes hard work. The advice for locking in a good deal remains the same: Do your research before you step foot in the dealership,” said Drury. ‘And while incentives are growing and those low APR offers look enticing, make sure they are for a length of time that makes a payment palatable for your budget.”
