Interest rates on new-vehicle loans hit another nine-year high in May, boosting monthly payments for consumers.
The average auto loan had a rate of 5.75% last month, reaching levels not seen since 2009 according to Edmunds. The annual percentage rate (APR) for new vehicles averaged 5.04% in May 2017 and 4.17% in May 2013.
But the spike in interest rates has yet to discourage car shoppers. Edmunds analysts said the prospect of greater rates later in the year is driving consumers to dealerships.
“Since interest rates have been creeping up all year, shoppers are likely thinking it’s better to buy now before rates get any higher,” said Jeremy Acevedo, manager of industry analysis at Edmunds. “However, this is likely a temporary pull-ahead effect, and could come back to bite automakers later in the year.”
Automakers sold 4.7% more vehicles in May and registered a seasonally adjusted annual rate (SAAR) of 16.91 million vehicles, up from 16.79 million a year ago. Sales gains were led by SUVs and pickup trucks, with Fiat Chrysler sales rising 11% on strong demand for Jeep vehicles. Ford F-Series truck sales rose to their highest May total since 2000.
The industry’s monthly sales growth includes an estimate for General Motors, which reports sales on a quarterly basis. GM sales surged 11.7%, Edmunds said.
Experts at the car-shopping website noted that interest rates have climbed as automakers cut back on zero-percent financing deals, which reached their lowest level in seven years. Automakers are using other incentives, such as cash bonuses, as an alternative to lure customers.
Along with higher transaction prices, rising APRs contributed to an increase in the average monthly payment for new vehicles sold in May. Payments averaged $535 a month, a gain of $25 year-over-year. The average loan term remained level near 69 months.
For used vehicles, buyers took out loans with an average payment of $399 a month. Used-car rates climbed to 8.22% from 7.63% last year.