New-car buyers are facing some daunting challenges, including high vehicle pricing and high interest rates, the combination of which is leading to record-breaking financing figures. Now, according to a new report, the number of new-car buyers taking on monthly payments of $1,000 or more reached a new high in the second quarter of 2023.
According to automotive researchers at Edmunds, the share of consumers who financed a vehicle with a monthly payment of $1,000 or more reached 17.1 percent last quarter, an increase of 0.3 percent from 16.8 percent in Q1 of 2023, and a substantial 12.8-percent increase from a figure of 4.3 percent recorded in Q2 of the 2019 calendar year.
Edmunds also indicates that new-car buyers paid an average monthly payment of $722 in Q2 of the 2023 calendar year, a $3 increase compared to an average monthly payment $730 in Q1 of 2023, and a $55 increase compared to an average of $678 recorded for Q2 of 2022.
“The double whammy of relentlessly high vehicle pricing and daunting borrowing costs is presenting significant challenges for shoppers in today’s car market,” said Edmunds’ director of insights, Ivan Drury. “The Federal Reserve’s recent pause in interest rate hikes unfortunately didn’t offer much relief for consumers, and hints at further raises later this year mean auto loan rates could even continue to increase.”
Edmunds also reports that the average APR was up to 7.1 percent in Q2, the highest average APR since 2007. The Q2 2023 figure represented an increase of of a tenth of a percent from an APR of 7.0 percent in Q1, and an increase of 2.1 percent compared to a figure of 5.0 percent recorded for Q2 of 2022. The average amount financed in Q2 of 2023 was above $40,000 for the fifth straight quarter.
The analysis also showed two distinct subgroups among those new-car buyers that signed on to a monthly car payment of $1,000 or more, with 64.5 percent signing for a loan-term loan range between 67 and 84 months, with an average APR between 8.5 percent and 9.6 percent. It’s suggested that this group may be upside down on their loans further down the road. The second group, representing 15.6 percent, signed onto loan term lengths between 31 and 48 months with a 2 percent to 4.8 percent APR, and are likely taking advantage of subsidized finance offers.