Unveiling the Average Monthly Car Payments of Americans: A recent Edmunds study found that the number of Americans who spend more than $1,000 a month on their car payments kept going up steadily in the third quarter of 2023.
Unveiling the Average Monthly Car Payments of Americans:
Interest rates have gone up, and so have the prices of cars and the costs of financing them. In an effort to slow down the economy and lower rising prices, the Federal Reserve has raised interest rates eleven times since March of last year. The federal funds rate is now at a 22-year high of 5.25% to 5.5%. Because of this, the rate Americans pay to buy a new car, called the annual percentage rate (APR), went up to 7.4%. Rates for used cars also went up to 11.2% since the second quarter.
The poll found that over 17.5% of people now pay more than $1,000 a month on their car note, up from 17.1% the previous quarter. This is because of higher financing costs. It was the highest monthly price ever for a new car, at $736 in the third quarter, up a little from $733 in the second quarter. It also hit a new high for used cars, with a down payment of $4,111, up from $4,107 in the second quarter.
Interest rates that are too high are still the biggest problem for people trying to buy a new or used car today, said Jessica Caldwell, Head of Insights at Edmunds. “And while the Federal Reserve held off on raising the federal funds rate in their most recent session, the expectation is rates will remain high or even increase slightly through the end of the year, which may help tame inflation in the long run but is inflating monthly payments for now.”
If you want to save money on your car costs, you might want to switch auto insurance companies to get a lower monthly rate. You can compare rates at Credible and find the best one for you without hurting your credit score.
No-interest loans are no longer available.
Buyers are seeing fewer deals with 0% loans these days because rates are higher. Edmunds says that the percentage of new cars purchased at these very low rates peaked in the second quarter of 2020, making up 24.2% of all sales. By the third quarter, that number had dropped to just 1.1% of all transactions.
Even though there aren’t any 0% financing deals right now, Edmunds says there are still deals to be had across different car makers, depending on things like availability, market competition, and regional factors.
“Ads for 0% financing may still be showing up to get people’s attention, but for the average car shopper, those deals are pretty much over,” said Ivan Drury, Director of Insights at Edmunds. “The APR for most people who are financing a new car today is 7.9%.” That’s not at all like the bad loans deals in the spring of 2020 that gave people 0% interest for 84 months and sparked a lot of sales of big trucks and SUVs.
You can get better deals on new car insurance if you shop around. You can review different providers on Credible and find your perfect rate in just a few minutes.
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These tips will help you pay less each month.
Even though rates are going up, it’s not all bad: In the third quarter, shoppers paid a little less on average to fund both new and used cars. The average loan amount for new cars dropped from $40,149 in the second quarter to $29,328 in the third quarter. The average loan amount for used cars dropped from $337 to $40,149. Edmunds also says that people can use these tips to make sure they are getting the best deal:
Get the most money for your trade-in.
You can probably get top dollar for your trade-in if you know how much it’s worth. It could also help you save money on your next buy.
Look around for the best loan rates.
If interest rates are high, looking for pre-approved loans might help you get a better deal. Edmunds tells people to be just as careful when looking for a car as they are when looking for pre-approved credit.
Buy an old car that hasn’t been driven much.
You might find a better deal on a used car than on a brand-new one. A lot of cars lose 20% of their value in the first year. You can save that much money by buying a used car that isn’t too old.
