NerdWallet: ‘Monthly payments will be pushed even higher.’ What can you do if you need to buy a new car?

by | Nov 28, 2022 | Stock Market

This article is reprinted by permission from NerdWallet.  When average monthly new-car payments surpassed $700 in May and car prices reached record highs, many potential car buyers decided to sit on the sidelines until the market returned to normal. Six months later, normal looks further away than ever. The Federal Reserve continues to raise the federal funds rate, driving auto loan interest rates to a 20-year high, and the average new-car transaction price remains above $48,000.

According to data company Cox Automotive, the average monthly new-car payment hit another record high of $748 in October. Average used-car payments have surpassed $550, based on a 70-month-term loan and 10% down. Automotive research firm Edmunds lists October’s average car loan APR as 6.3% for new and 9.6% for used. Ivan Drury, Edmunds senior manager of insights, says slight improvements in car supplies and pricing are being negated by increasing rates. “Even if you save $500 on a car’s purchase price, it could be obliterated on interest rate if you don’t get the exact APR that you need,” Drury says. To illustrate Drury’s point, financing a $46,000 car for six years with a 3.1% APR would result in a $700 car payment. Reduce the loan amount to $42,000 at 6.3% APR for the same term, and you still have a $700 car payment. Matt Degen, senior editor with Kelley Blue Book, says, “From what we’ve seen so far, it’s still getting tougher out there to get even a used car. And I don’t know that’s going to be changing much. Even if the inventory issues recede more, with rising interest rates and tighter lending standards, that could just be another difficulty for folks to overcome.” See: This is now the cheapest new car in America, and one of a vanishing speciesHigh car payments are affecting all car-buying segments During Cox Automotive’s quarterly auto industry call, senio …

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