Q3 2024 Auto Summary:  Higher Payments, Longer Loans

Last week Car Pro Show host Jerry Reynolds shared the Q3 2024 U.S. auto sales numbers which show sales down roughly 13% year-over-year.  Reynolds points to Hurricane Helene, spot-shortages at several automakers, and sluggish sales in September as contributing factors.

This week, we turn our focus to auto financing. Edmunds says 'unrelenting' auto financing conditions squeezed new-vehicle buyers in the third quarter.  A potentially troubling sign, analysts say, is an uptick in 84-month loans, which could signal that consumers might be taking on more than they can afford. 

Edmund shares its new data highlights in a press release:

• Interest rates are sitting at near-record highs:  Edmunds says the average new-vehicle APR in Q3 2024 remained elevated at 7.1% - the same as in Q2 2024. This marks the sixth consecutive quarter that new-vehicle APRs have hovered above 7%.
• 0% finance deals remain nearly impossible to find (or qualify for): 0% finance deals accounted for just 3% of all new financed vehicle purchases in Q3 2024, which was the same as in Q1 and Q2 2024. Edmunds says its analysts note that even if buyers were able to find a 0% financing offers, they'd still need to have excellent credit to qualify - which Edmunds says is a challenge for many consumers. 
• Consumers continue to sign up for longer loan terms in order to stomach higher prices:  Long term lengths continue to be the trend. Edmunds says 69% of new-vehicle loans had terms over 60 months in Q3 2024, similar to a share of 70% in Q2 and 69% in Q1. Analysts also note that 84-month auto loan terms are on the rise. They accounted for 18.1% of new-vehicle loans in Q3 2024 versus 17.3% in Q2 and 15.8% in Q1. 
• New-vehicle shoppers are taking on $1,000+ monthly payments at near-record levels: $1000+ monthly car payments also continue.  Edmunds says the share of consumers taking on loans with new-vehicle monthly payments of $1,000 or more was 17.4% in Q3 2024, marking the sixth consecutive quarter that the share of $1,000+ monthly payments was above 17%. 
• A majority of car shoppers are holding off on purchasing their next vehicle because of high interest rates: Edmunds says it conducted a survey in August 2024 among car shoppers who have purchased a vehicle previously and have indicated they are planning on purchasing a vehicle in the next 12 months. 62% of the respondents stated that they have held off on buying a new vehicle because of high interest rates.

The bottom line here is the finance market did not get better for new-vehicle buyers in the third quarter. 

"Q3 was unfortunately the same old story as the first half of 2024 in terms of auto financing conditions: Car shoppers found little relief from the elevated interest rates and high prices, which in turn hindered new-vehicle sales growth," said Jessica Caldwell, Edmunds' head of insights. "The Fed's decision to cut rates was a welcome update at the end of the quarter but, on its own, is unlikely to dramatically change the financial landscape for car buyers." 

The rise in those aforementioned 84-month auto loans isn't a good sign either, analysts say.

"Longer loan terms might make monthly payments more palatable for consumers, but the harsh reality is that most Americans don't want to keep their vehicle for seven years," said Ivan Drury, Edmunds' director of insights. "Simply put, longer loan terms put car owners at greater risk of rolling negative equity into their next auto loan."

Edmunds.com Quarterly New-Car Finance Data
(Averages)

Edmunds.com Quarterly Used-Car Finance Data
(Averages)