As the Federal Reserve Thinks interest rate hike On Wednesday, the auto industry is in the spotlight. For many Americans, owning a car is a necessity, but strong demand and rising interest rates have pushed prices so high that many cannot afford to buy one.
Prices fell slightly from historical levels, but averaged new car price There are still nearly 500,000. The average used car price is about $28,000.
In addition, monthly payments are skyrocketing, with annual rates reaching 11%.
According to car shopping site Edmunds, the average monthly payment for a new car is $731. Used for $551. This represents an increase of up to 32% from pre-pandemic levels.
Adam Lee, who owns 16 car dealerships in Maine, says the average price of a car at his dealership is about $50,000. He said the business has been particularly strong over the past three years, but he’s feeling a change.
“We’re still seeing very strong demand, but… you can feel it — it’s slowing down,” Lee said.
According to Edmunds, one in six people who recently financed a new car pledged more than $1,000 a month, the highest amount ever.
Lee said the industry could lock up if interest rates continue to rise.
“Most dealers are in debt to pay for their cars. It means not ordering a car for a car,” he said. .
Inventories have improved recently, but new car production favors more expensive models with more amenities.
Demetrius Thrasher, who relies on his car to deliver food to suburban Atlanta, had to buy a new car for about $25,000 more than originally planned. His previous car was a total loss in a crash last summer, and he found his options for a new car limited.
“I called other dealers and all over Georgia and they said, ‘We didn’t get anything,'” Thrasher said.
He currently pays about $1,000 a month for his car and has had to defer payments twice.
This is becoming more common. Data from Cox Automotive shows he has a 20.4% increase in delinquency rates for auto loans that are 60 days or more in arrears compared to last year.
According to Jessica Caldwell, who analyzes car deals for Edmunds, consumers are facing a “double hit” as car prices and interest rates are both high. But automakers are offering incentives to shoppers to help those struggling to find affordable options, she said.
Caldwell suggests looking for auto loans that offer favorable interest rates and terms, and also keeping in mind the long-term trade-in value of your car.
“If you go to trade in the car and overpay, there can be a big difference between the car’s value and the loan repayment amount. And that’s the problem. Scary,” she said.