Rising new and used vehicle prices have been a running theme in the automotive industry ever since the effects of the microchip shortage began to take hold early last year. It seems as though rising vehicle prices are not going away anytime soon, either, with many car buyers seemingly eager to lock themselves into costly financing deals with monthly payments of $1,000 or more.
A recent study conducted by Edmunds indicates that 12.7 percent of car buyers who financed a new vehicle purchase in June 2022 committed to a steep monthly payment of $1,000 or more, which is the highest level that the research firm has on record. The average amount financed for new vehicles also hit a near-record level in the second quarter of 2022, climbing from $39,726 in Q1 to $40,602 in Q2.
Edmunds also found that new-vehicle lease penetration fell to 18.5 percent in June 2022, down from 30.5 percent in June 2019, as more and more car buyers forgoed leases to purchase their vehicle outright.
Jessica Caldwell, Edmunds’ executive director of insights, said there’s no shortage of wealthy buyers willing to pay big bucks to get the vehicle they want at the moment, but this is pricing many Americans out of new vehicles altogether.
“Although there appears to be a steady stream of affluent consumers willing to commit to car payments that look more like mortgage payments, for most consumers the new car market is growing increasingly out of reach,” she said.
Ivan Drury, Edmunds’ senior manager of insights, cautioned consumers against entering long-term financing contracts to help make their new vehicle purchase more affordable, as this can come back to bite them should financing rates go up.
“A single percentage point increase might not seem like much at first blush, but that adds up to hundreds, if not thousands, of dollars over the course of a 72-month (or longer) loan — a significant cost considering consumers are financing as much as ever,” he said. “The best moves shoppers can make are staying as informed as possible and not relying on car financing strategies of old — because buying a car in 2022 is a whole different ball game.”