It's an unprecedented time for car shoppers who are facing never-before-seen high prices, on both new and used vehicles. (Tune in to the Car Pro Show each Saturday or listen to the podcast to get the latest from the Car Pro Jerry Reynolds on what's happening in the market.) Record high numbers go beyond the sticker price, too, and extend to higher monthly payments, average finance amounts and down payments. Edmunds breaks down its latest data from the first quarter ending March 31st, to give us the big picture on how it looks out there for shoppers.
Average Monthly Payments
According to Edmunds.com, new and used car buyers are now paying the highest average monthly payment prices on record.
As of Q1, Edmunds says new vehicle buyers can expect to pay an average monthly payment price of $648, up from $639 in Q4 2021 and from $575 in Q1 2021. The average monthly payment for used vehicles is also expected to climb to a record-breaking $538, compared to $524 in Q4 2021 and it's nearly $100 more than $432 in Q1 2021.
It follows that financing amounts are also expected to reach record levels in the first quarter of 2022. Edmunds says the average amount financed will climb to $39,340 for new and $30,830 for used compared to $35,040 and $23,958 in Q4 2021, respectively. Edmunds attributes this in part due to luxury shoppers moving away from leasing and opting to finance instead. Luxury leases fell to 32% in March of 2022, down substantially from 53% in March of 2019.
"Shrunken inventory continues to wreak havoc on both the new and used vehicle markets, and shoppers who can actually get their hands on a vehicle are committing to never-before-seen average payments and loan terms," said Jessica Caldwell, Edmunds' executive director of insights.
Down payments on new vehicles are also at record levels too - surpassing $6,000 for the first time ever. Edmunds says the average new vehicle down payment climbed to $6,026 in Q1 2022, up 27% compared to Q1 of 2021. The average down payment on used vehicles is about half that, climbing to $3,574 in Q1 2022, or a 7% increase compared to Q1 2021. At the same time, Edmunds analysts used car buyers are taking out longer loans. Data shows that loan durations set a new record in Q1, climbing to 70.4 months compared to 68.2 a year ago.
Proceed With Caution
Edmund says its analysts also note that longer loan terms might seem appealing to car shoppers because they offer lower monthly payments, but caution that they can also present risks to consumers down the road.
"Many car shoppers are likely seeing red when faced with the prospect of paying sticker or above sticker price for new vehicles, and are defaulting to the used market to seek relief, but this is not a normal market, and financing a used vehicle could potentially end up costing you more in the long run," said Ivan Drury, Edmunds' senior manager of insights. "If you're financing a three-year-old vehicle with a 70-month loan, you'll have a nine-year-old vehicle by the time you complete your payments. That's risky business when you consider wear-and-tear, and you could be at greater risk of needing to roll negative equity into your next car loan."
What To Consider
Also, remember that buying used doesn't mean saving money especially when you consider the current market. Edmunds advises consumers to consider buying a new or certified pre-owned vehicle for their favorable interest rates and warranties.
"It's easy to be blinded by the initial sticker shock of paying MSRP for a new vehicle, but car shoppers need to focus on the bigger financial picture," said Drury. "Used vehicles might save you some money upfront on the purchase price, but make sure you're not paying too much to the bank in the form of high interest rates."
To read more of Edmunds' quarterly data click here.
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