Similar to mortgage rates, new car loan rates have increased to their highest levels since the last recession. Car-shopping website Edmunds.com said the yearly percentage rate for new financed vehicles hit 5.6 percent. Five years ago, the rate was 4.2 percent.
Along with increasing interest rates, people are paying higher prices for their vehicles including SUVs with the average transaction price hovering around $35,000. Kelley Blue Book said this is a two percent increase from the previous year.
Jessica Caldwell, Edmunds executive director of industry analysis, said buyers should prepare themselves as the new normal with higher monthly payments and interest rates. She said with the possible Fed rate hikes coming, it’s unlikely the automakers are willing to compromise on prices, making it more expensive for consumers to buy a vehicle.
The average monthly payments for a new vehicle rose to $535 from 2017. Consumers also saw an increase in financing average to more than $31,000.
Buyers do have the option of putting money down and extending loan lengths to lower their monthly payments. April down payment had an average of $3,900 with loan repayments of 72 months or more.
The trend is also being seen in the used car market, where the interest rate rose from 7.7 percent to 8.3 percent. Buyers saw a $300 increase in the average amount financed.
Automakers have noted U.S. sales have dropped five percent during April, although there were still 17.15 million vehicles sold.