Since the onset of COVID-19 pandemic and the associated production cuts and supply shortages, new car payments have been on the rise as vehicle inventory at dealerships struggled to remain consistent. Now, despite inventory levels recovering to nearly pre-pandemic heights, new car payments reached record highs as of Q4 2023.
According to a report from Edmunds, average payments rose to $739 per month, which is up slightly from $736 in Q3 2023 and $717 in Q4 2022. In addition, down payment averages crossed the $7,000 mark for the first time to $7,074 in Q4 2023, as compared to $6,907 in Q3 2023 and $6,780 in Q4 2022.
While the average monthly payment is certainly sky-high, digging deeper reveals that 17.9 percent of new car payments come in at $1,000 or more a month, also a new record. For reference, 17.5 percent and 15.7 percent of consumers paid this amount in Q3 2023 and Q4 2022, respectively.
“On the surface, car financing appears to be following the harsh trend line of the past few years, with average monthly payments and down payments reaching all-time highs for new vehicles,” Edmunds’ Head of Insights Jessica Caldwell claimed in a prepared statement. “But there are some very encouraging signs as we kick off 2024 when considering the makeup of deals in the latter half of Q4 2023. Incentives are slowly coming back as inventory improves. Most consumers are looking for low APRs with longer loan terms, so the growth in those loans is helpful to lure consumers who have been sitting out due to adverse financing and pricing conditions.”
While these current new car payments are not ideal, Edmunds believes there may be some positive indicators for the future. These include items like lower APRs becoming more available, and a notable jump in the share of new vehicle sales with zero percent APR financing.
“While shorter term loan deals are still most common with low APR financing, it is encouraging to see more reasonable term lengths becoming more prevalent with APRs below 4 percent,” Edmunds’ Director of Insights Ivan Drury stated.