The average monthly car payment for a new or used car is expected to reach a record high in the first quarter of 2022, according to a recent analysis conducted by Edmunds.
The average monthly payment for new vehicles purchased in the first quarter of 2022 is expected to climb to $648, Edmunds reports, which is the highest level that the market research firm has on record. This result is up from $639 in the fourth quarter of 2021 and up from $575 in the first quarter of last year.
The average monthly payment for a used car is also expected to break a record for Q1, Edmunds says, climbing to $538. This compares with $524 in the fourth quarter of 2021 and $432 in the first quarter of last year.
Not surprisingly, Edmunds’ data revealed that the average amount financed for both new and used vehicles will also hit record levels in the first quarter of 2022. These figures are expected to climb to $39,340 and $30,830, respectively, compared to $35,040 and $23,958 in the fourth quarter of last year.
Jessica Caldwell, Edmunds’ executive director of insights, said a lack of inventory is causing desperation among car shoppers, forcing them to sign financial deals they otherwise would not.
“Shrunken inventory continues to wreak havoc on both the new and used vehicle markets, and shoppers who can actually get their hands on a vehicle are committing to never-before-seen average payments and loan terms,” she said.
To help combat this trend, Ivan Drury, Edmunds’ senior manager of insights, advises consumers to look for cheap new or certified pre-owned vehicles, as these vehicle types are typically offered with better financing rates and superior warranties should something go wrong with the vehicle in the future.
“It’s easy to be blinded by the initial sticker shock of paying MSRP for a new vehicle, but car shoppers need to focus on the bigger financial picture,” said Drury. “Used vehicles might save you some money upfront on the purchase price, but make sure you’re not paying too much to the bank in the form of high interest rates.”
The lack of inventory in the automotive industry is driven by the global semiconductor chip shortage, which has forced automakers to reduce production output at their facilities, along with other parts shortages tied to the global supply chain crunch. Lingering impacts from the COVID-19 pandemic have also slowed vehicle production output in recent months. A lack of new vehicles co-relates with a used car shortage, as buyers are less likely to trade in their existing car for a new one if there is limited inventory.