New-vehicle financing’s average annual percentage rate hit 6.19%, the second highest point in a decade, according to Edmunds, a digital automotive marketplace.
This compares with 4.99% in January of 2018 and 4.22% five years ago. The average APR on used vehicles was 8.88% in January, up from 7.83% the same time a year ago.
The rate rise partly stems from zero-percent financing deals dropping to their lowest level since 2006, says Edmunds, also noting tightening credit conditions and rising vehicle prices.
The average new-vehicle transaction price is expected to reach a near-record high of $37,150 in January.
“Car shoppers who are returning to the market for the first time in a few years could be in for a big shock,” says Jessica Caldwell, Edmunds’ executive director-industry analysis. “Vehicle prices and interest rates are so high right now that consumers are facing the very real possibility of spending thousands of dollars more on a new vehicle than they did last time they purchased a new car.”
After a blow-out December with light-vehicle sales of about 1.6 million, deliveries dropped to about 1.1 million units in January – not a surprise, considering
historical patterns, according to Wards Intelligence.
Despite the relative strength of January sales, “higher fleet sales give the false appearance of a more-robust sales month,” Caldwell says. “If the economy starts to slip for any reason, we could see significant repercussions for the overall market.”
In tracking financing, Edmunds reports these other averages.
- Loan terms: 69.1 months for new vehicles, 67.2 used.
- Monthly payments: $551 for new, $407 used.
- Financed amount: $31,707 for new, $21,763 used.
- Down payment: $4,191 for new, $2,614 used.