CNN
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You’ve managed to buy the car, but can you afford to keep paying for it?
Along with soaring car prices, loan rates are the most expensive they’ve been in more than 15 years, with the average monthly payment on a new car at an all-time high, new data from auto website Edmunds shows.
The result of the one-two punch of higher prices and interest rates is that it’s taking Americans much longer to pay off their car loans — which include crossovers, SUVs and pickup trucks — and more buyers are being pushed out of the car market altogether.
“The reality is that you’re getting a narrower, narrower and narrower buying pool that actually can afford to buy new vehicles,” said Jonathan Smoke, the chief economist at Cox Automotive.
The average annual percentage rate (APR) on financing a new car climbed from 4.5% in March 2022 to 7% a year later. Even after falling slightly from February, that’s the highest loan rate since 2008, according to Edmunds data published this month.
High loan rates mean monthly payments are soaring as well. In March, the average monthly payment for financing a new car hit $730 — the highest on record, according to Edmunds. The average payment for financing a used car is now $556 per month, which is up a staggering $147 from June 2020.
More new car owners are paying as much as $1,000 a month. In January 2019, new car payments over $1,000/month made up roughly 5% of sales. In March 2023, only four years later, four-figure monthly payments ballooned to 17% of the new car market.
Some of the high-monthly-payment buyers are people with short-term loans — usually three or four years — with a high monthly payment and large amount down. The number of those shorter-term loans has grown over the past two years, but the prohibitive up front cost means they’re still only a small portion of the market, Edmunds director of insights Ivan Drury said. Most $1,000 per month car loans are taken out by people who choose high-interest, longer-term loans.
Rising car prices and the growing difficulty to qualify for lower interest rates have forced buyers to stomach a heftier monthly bill over a longer period of time — as long as seven years — for a lower down payment up front.
In 2004, only 1% of auto loans lasted six to…
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