The average interest rate for auto loans dropped for the third month in a row in December, falling to its lowest point since February 2018, while new vehicle prices continue to soar, according to Edmunds, the automotive industry-tracking website.
The annual percentage rate for newly financed cars averaged 5.4 percent in December, a slight drop compared to 5.5 percent in November. However, last month was noticeably less than last December, where the APR for auto loans stood at 5.9 percent, according to Edmunds.
The data revealed that 22.4 percent of car shoppers who financed purchases in December 2019 were offered an interest rate under 3 percent compared to just 20.4 percent of financed car purchases in December 2018, Edmonds' report noted.
"Automakers and dealers gave new car buyers a lot of reasons to feel some holiday cheer in December," said Jessica Caldwell, executive director of insights at Edmunds. "Everyone knows new car deals are usually sweetest at the end of the year, but it's been a long time since financing offers were this good."
While interest rates hit a 22-month low in December, the cost of new vehicle prices are hitting near-record highs, with the average transaction price for a new car expected to climb to $38,377 in December, up over $1,000 compared to last year when new car prices averaged $37,260 and nearly $5,000 more than to five years ago, when the average price for a new car was $33,773, according to Edmunds industry insight report.
"The December numbers aren't always indicative of larger market trends because people tend to buy pricey luxury vehicles, trucks and SUVs this time of year. This drives up the average transaction price and lowers the average APR since these shoppers can usually qualify for the lowest promotional rates," Caldwell added. "But the fact that rates have been on a steady decline for the last several months bodes well for more favorable financing conditions in 2020."
In terms of monthly car payments, the average cost was $577 per month with a downpayment of $4,498 in December 2019, compared to $558 on a $4,487 downpayment in December 2018 and $499 on a $3,687 downpayment in December 2014, Edmonds reported.