Car Buyers Increasingly Jumping Into $1,000+ Monthly Payments, Study Says
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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.”
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Come on recession! Pop this bubble.
The crypto cultist lost their wealth & can’t corrupt the rest of the market with their excess. Now it’s the EV cultist turn.
The agony. The sheer misery of a monthly car payment is, thankfully, something I haven’t had to experience in many years. I pity the poor bastards working to pay off an automobile they can’t afford.
Maybe the real story behind these higher payments goes like this:
1. Someone has a few year old Suburban paid off and is ready to upgrade to a new Yukon.
2. Huge equity in their old Suburban.
3. Manufacturer is offering 0% interest over 3 years.
4. Buyer decides to take advantage off that low interest and finances the balance owed over 3 years and payment ends up being $1000/month.
5. No big deal to the buyer as they have sufficient cash flow.
Good chance it’s this type of buyer who’s buying right now, not the individual trying to scrape together money to buy more than they can afford.
Well see in a year or so I believe the Repo man is gonna be busy . All of people are willingly paying mark ups on vehicles also
A friend of mine is a repo man and told me he is so busy it’s unreal. They have holding pens where they store the repos after they get them back from the would be customer. They are all full at max capacity. So what does that tell you? People need to go back to third grade and learn basic math. Just dumb….that reminds me, I need to go put $12.00 down on a new Caddy…be right back.
So what vehicles are they putting in their lot? How old are they? What make/models? Did the buyers purchase new and defaulted or are they individuals that purchased a used vehicle over the past 18 months and couldn’t afford it?
Or you just making this all up?
Dude…we were just talking about his job and how busy he is with repossessions. Human buys car…human can’t make payments…human gets calls and/or letters asking for payment…human ignores requests for payment….repo man pays a visit. You want details man? I don’t have all of the details you require but if you want to do a zoom meeting with him and get the info, if that will make you sleep better at night, by all means…jeez man…go take an aspirin and lay down a bit…make and model ca mon.
I had a next door neighbor who told me that was the way he purchased a vehicle and his monthly payments were $750 a month for a fully loaded F-150 Lariat , I said to myself…WTF??
Not someone you should trust in any way for financial advice, but it’s basically an optimal time to get a bank to pay for a good car in full without any down payment. We are in for 5 years or so of inflation, which means if your interest rate is lower than inflation, the money your bank spends today is worth a lot more than the money you are spending at the end of 72 or more months.
My opinion (and justification) for picking up a nice car with >$1000 payment and zero down is that my thousand dollars in a year or so is going to be worth best case about 900 bucks, and in 5 years around 700. But the bank is holding the bag spending their current 80k or so of valuable money, and not me.
If I’m wrong, due to the interest rate, worst case the loan is effectively free and I’ll pay 80k’s worth of money by the end of the loan term on an 80k loan with today money.
Again, not financial advice in any way
Agree, best to spend your cash now, it is declining in value every day. Just don’t pay over MSRP that just defeats the purpose.
My issue is the apparent IDGAF mentality of the few workers still actually working along with second and third tier suppliers getting business with reduced quality concerns. I honestly would have trouble buying most vehicle made after 2019 right now. The Quality seems to be suffering. It will be interesting to see what a glut of say 95,000 silverados on the recession spooked market will do. and whether it will severely upside down the people paying over original MSRP for whatever used vehicle they might actually find to replace a wrecked or worn out vehicle. remember parts to fix these older cars are also getting scarce and expensive.
Wow, I’ve never even had a house payment that high! I prefer to use the employee discount and write a check.
Price vehicles don’t Suprised me! Better to get into a new vehicle right now than a used one money wise( most folks). That said if you gotta do a 1000$ car payment your in over your head and need to look at a cheaper vehicle and not try n keep up with Jones! If you have the cash flow and business n can write it off for business then sure👍
It’s there for people that can afford it, as many said here don’t keep up with the Joneses if you truly can’t pay for it.
I’d rather have a $1,000 monthly car payment than a $500 monthly lease payment.
Me too! I drive my money out of a purchase over 10 years, it’s much cheaper than a lease in the long run.
The car market is crazy! I saw a listing for a 125K Escalade! the terms listed were 20k down and 1700.00 a month for 72 months! My house was less than that when I bought it. There is no way I could afford that kind of deal and still eat… I’m glad I stuck to old hot rods and my old Volt… My ’55 is still my favorite! (I rounded the numbers but that was an actual deal at a local dealer. I had to call and ask if people actual do those deals… They said YES!)
That is crazy. I am ready for a new truck but I am waiting for the recession to bring pricing and availability back to normal first.
I’m sure repo numbers are high in these volatile, inflated times. If gm financed it they eat it. They have those numbers. I would love to see them.
Soon the repo lane at the auction will be full of bargains
2021-2020 REPOSSESSION FACTS (UNITED STATES DATA)
2.2 million vehicles are repossessed every year (2021 updated data)
5,418 repossessions every day
226 car repossessions each hour
3.76 repossessions a minute
That’s a lot of re-pops!