With incentive spending sitting at near-record lows and average new-vehicle transaction prices climbing rapidly, it’s no surprise that most American motorists are seeing a sharp rise in their monthly new car payment, too.
According to Cox Automotive, the average monthly payment for a new car reached a record $733 in July, up 0.9 percent from June and up a significant 15 percent from the same time period last year. The average price paid for a new car last month, across both mass-market and luxury vehicles, stood at $48,182, up 0.3 percent from June. The average interest rate is also climbing consistently, rising 19 basis points in July, causing new vehicle affordability to decline even further.
A 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 fiscal quarter of this year, climbing from $39,726 in Q1 to $40,602 in Q2.
Rising vehicle prices are forcing many consumers into long-term financing contracts, as well, a practice that Ivan Drury, Edmunds’ senior manager of insights, cautions consumers against.
“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.”
GM has seen its average transaction prices rise across all four of its brands, with Chevy and GMC seeing steep increases thanks to strong demand for well-equipped versions of full-size truck and SUV models. The coming introduction of more high-priced GM electric vehicles like the GMC Hummer EV SUV and Chevy Silverado EV RST First Edition will also likely contribute to high ATPs for GM brands going forward.