Auto loan rates topped 5% in April for a third consecutive month, making it more costly for consumers to finance a new vehicle.
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Like mortgage rates, interest rates on new car loans have jumped to their highest level in years. In fact, auto loan rates have reached levels not seen since before the recession, according to Edmunds. The car-shopping website said the annual percentage rate (APR) on new financed vehicles averaged 5.6% last month, up from 5% in April 2017. Rates averaged 4.2% five years ago.
In addition to rising interest rates, buyers are paying elevated prices for new vehicles, particularly SUVs. Average transaction prices (ATPs) hit $35,411, a 2% increase year-over-year, Kelley Blue Book said.
Edmunds Executive Director of Industry Analysis Jessica Caldwell noted that it’s not an unprecedented situation for buyers, but they should brace themselves for a “new normal” of higher interest rates and monthly payments.
“With more potential Fed rate hikes ahead, we don’t expect to see these higher vehicle ownership costs retracting unless automakers are willing to dig much deeper into their pockets,” Caldwell said.
The average monthly payment for new vehicles came in at $535, compared with $509 in the same month last year. Consumers financed an average of $31,318, which reflects a yearly increase over $30,315.
Buyers are putting more money down and extending the length of their loans to help keep monthly payments in check. Down payments averaged $3,911 in April, an extra $141. With more buyers opting for 72-month loans or longer, loan terms averaged 69.2 months.
The used-car market has seen similar trends. Auto loan rates for used cars climbed to 8.3% from 7.7%, and buyers financed $21,620 on average, an increase from $21,330.
|GM||GENERAL MOTORS COMPANY||36.38||+0.09||+0.25%|
|F||FORD MOTOR COMPANY||9.55||+0.04||+0.42%|
|FCAU||FIAT CHRYSLER AUTOMOBILES N.V.||15.77||+0.16||+1.02%|
Automakers reported combined U.S. sales that fell roughly 5% during the month. The seasonally adjusted annual rate was a strong 17.15 million vehicles, according to Autodata. The industry has posted a SAAR of at least 17 million for eight months in a row.
Monthly auto sales include an estimate for General Motors, which has begun reporting sales on a quarterly basis. GM’s U.S. sales fell about 3%, Edmunds said. Ford reported a 4% decline, while Fiat Chrysler boosted sales by 5% on demand for Jeep SUVs.