Car Buyers In The Second Quarter Had To Stretch Budgets

As Car Pro Show host Jerry Reynolds has shared on the weekly Car Pro Show, new vehicle inventory is up and new vehicle incentives are increasing. Both great things for car buyers. However, despite the improving market conditions in those areas,  high vehicle prices and unrelenting borrowing costs posed significant challenges for consumers in the second quarter, according to  Edmunds. In its trends analysis of the market, Edmunds goes so far as to say that new-vehicle buyers were "stretched to financial limits" in Q2.

Edmunds analysts say that while inventory has improved, which has led to some discounting, vehicle prices remain elevated, and lingering high borrowing costs have only made buying a new vehicle more challenging.

New data from Edmunds reveals consumers who financed new vehicle purchases in the second quarter of 2024 are:

• Contending with ongoing elevated interest rates: The average new-vehicle APR in Q2 2024 climbed to 7.3%, an increase from 7.1% in Q1. This marks the sixth consecutive quarter that new-vehicle APRs have hovered above 7%. 
• Taking on longer loan terms to mitigate higher prices: Roughly 70% of new-vehicle loans had terms over 60 months in Q2 2024. The average new-vehicle loan term in Q2 2024 was 69 months, the highest point since the end of 2022 when average new-vehicle interest rates sat under 7%.
• Not putting as much money down and seeing monthly payments spike to all-time highs: The average new-vehicle down payment dropped to $6,579, the lowest mark Edmunds has seen since Q3 2022. Edmunds analysts note this has contributed to the average monthly payment reaching an all-time high in Q2 2024 of $740, up from $735 in the prior quarter and $733 a year ago.
• Taking on monthly payments over $1,000 at near-record levels: The share of consumers taking on loans with new-vehicle monthly payments of $1,000 or more was 17.8% in Q2 2024, just shy of the record 17.9% share in Q4 2023, which Edmunds analysts note is a quarter when vehicle prices are seasonally higher.

"High interest rates continued to be a heavy drag on new-vehicle sales growth in the second quarter," said Jessica Caldwell, Edmunds' head of insights. "In theory, improved inventory and growing incentives should paint a more consumer-friendly picture of the market, but the reality is most Americans can't buy their cars with cash, and increased borrowing costs continue to be a major roadblock when buying a new vehicle."

Edmunds Quarterly New-Car Finance Data
(Averages)

Quarterly Used-Car Finance Data
(Averages)

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