Car Loans Hit 7% Average, With Average Monthly Payment $730

If you're in the market for a new vehicle, be prepared for some vehicle financing shock. Edmunds.com's first quarter data shows the average new vehicle financing interest rate is at its highest level since 2008 - at 7% - which is driving a record share of $1,000+ monthly car payments. The average car payment is a record high $730 a month in Q1, up from $656 year-over-year.

Car Financing Increasingly Out Of Reach

Edmunds experts say financing a new vehicle purchase continues to grow increasingly out of reach for many consumers due to high interest rates, despite increasing inventory.  Just check out these stats: 

• The average annual percentage rate (APR) on new financed vehicles in Q1 2023 climbed to 7%, compared to 4.4% in Q1 2022, which is the highest level Edmunds has on record since Q1 2008. However, Edmunds analysts note that March marked the first time after 14 consecutive months of increases that the average new-vehicle APR stayed flat (at 7%), which they attribute to a moderate increase in subsidized financing by automakers.
• The average monthly payment for new vehicles hit a record high of $730 in Q1 2023, compared to $656 in Q1 2022.
• 16.8% of consumers who financed a new vehicle in Q1 2023 committed to a monthly payment of $1,000 or more — a new all-time high according to Edmunds — compared to 10.3% in Q1 2022 and 6.2% in Q1 2021.
• The average down payment for a new vehicle is up too - climbing to a record high of $6,956 in Q1 2023, compared to $6,083 in Q1 2022.

"Since inventory levels are improving, interest rates are now topping the list of the greatest obstacles that automakers will be facing in 2023 to move metal," said Jessica Caldwell, Edmunds' executive director of insights. "But with major challenges come great opportunities: Since interest rates are at the forefront of consumers' minds, any automaker or dealer that can advertise incentives related specifically to interest rates will likely get more attention. This could be a powerful marketing tool that would enable sellers to tap into the significant pent-up demand that has been building over the past few years and convert that demand into actual sales."

Edmunds says its analysts took a closer look at financed new vehicle purchases in Q1 2023 and calculated the average monthly payment, amount financed, APR, down payment and total interest paid — in each case based on loan term lengths.  You can check out the data in the tables below.

Edmunds experts note that these figures highlight the big contrast between the consumers who are able to take advantage of lower APR offers and those who can't. Although quarterly figures appear to reflect that the average loan term has remained static at around 70 months, Edmunds analysts say term lengths aren't the full story — which is that more car shoppers are being pushed to the extreme ends of the finance terms spectrum. In the first quarter, Edmunds data shows that 12.3% of consumers opted for 36- or 48-month loan terms, which is the highest Edmunds has on record since back in Q4 2009, while a majority of consumers are extending loan terms out as much as possible to make buying a car more affordable. 

Q1 2023 New-Car Finance Data Broken Out by Loan Term Length

(Averages)

"It takes money to save money in today's market. Although more automakers are offering to subsidize auto loans with lower interest rates, the catch is that most of these offers require that consumers agree to shorter 36- or 48-month loan terms — which might put people off at first glance," said Ivan Drury, Edmunds' director of insights. "If you're a qualified buyer and have the means to put more money down, whether in cash or via your trade-in, know that you have a serious advantage — you'll be committing to a much larger amount toward the down or monthly payment, but you will save up to tens of thousands of dollars over the course of your auto loan."

Quarterly New-Car Finance Data

(Averages)

Quarterly Used-Car Finance Data

(Averages)

All data sourced from an Edmunds.com press release.

Image Credit: Billion Photos/Shutterstock.com.