Car Payments Are Now $1,000 or More For 15.7% of Buyers

According to Edmunds, the car affordability crisis has hit a fever pitch with buyers of both new and used cars paying more than ever. With the Federal Reserve raising rates car loans in excess of 7% interest are commonplace. This high monthly payment can’t be explained away by luxury buyers as Edmunds also noted only 16% of luxury buyers are choosing to lease a significant decrease from the past 4 years. The average monthly payment for new vehicles is $717 and $563 for used vehicles. Interestingly, the term of the loans has stayed relatively stable at ~70 month terms, which defies the increasing trend of available financing for longer term loans seen more widely in Europe. Will the auto financing industry try to seduce customers with the siren song of 120 month financing to be available to afford their dream car or will auto dealers finally have to accept lower prices and inventory glut?

If you are going to pay over 10% of your income on transportation you should probably know where to put your Uber or Lyft sticker.

If the situation doesn’t turn around quickly this will spell trouble for many manufacturers and dealers in 2023.

On a positive anecdotal note, my Uncle tried to preoder the new all electric Subaru and was the 52nd caller for the 8 cars the dealer was proportioned for pre-orders from the manufacturer and was told they weren’t accepting anymore pre-orders. I’m not saying short Carvana and invest in lithium, but maybe wait a little longer before splurging on a car.