Bloomberg: Car Payments Top $800 Per Month In September

The average monthly payment on a new vehicle was projected to reach $821 in September, a record for that month, according to JD Power figures reported by my friend and Car Pro Show guest David Welch of Bloomberg. That works out to $9,852 a year in payments alone, before insurance, fuel, maintenance or registration. For families already stretching their budgets, that is a substantial commitment just to put a new vehicle in the driveway.

Welch’s reporting for Bloomberg illustrates how difficult new-car affordability has become. The average selling price topped $50,000 in August, driven by growing sales of midsize SUVs and price increases on smaller, more affordable vehicles. That last point matters: Shoppers looking for something less expensive are also feeling the squeeze. Moving down in vehicle size does not necessarily provide the financial relief buyers might expect.

Before the pandemic, the average new vehicle sold for less than $40,000, Welch reports. Manufacturers offered more compact vehicles below $25,000, along with substantial discounts. Those conditions helped annual U.S. vehicle sales exceed 17 million for much of the preceding decade. Today’s shoppers face a different equation, with higher purchase prices and financing costs making the monthly payment harder to fit into the household budget.

Yet vehicles are still selling better than forecasters expected, and Bloomberg’s reporting helps explain why. Sam Fiorani, vice president of global forecasting for AutoForecast Solutions, described a market supported by higher-income customers buying expensive pickups. He told Bloomberg that growth at the expensive end of the market has come alongside the loss of buyers earning less than $100,000 annually. In other words, healthy showroom activity does not mean everyone can afford to participate.

According to Welch, Cox Automotive projected a third-quarter annualized sales pace of 16.3 million vehicles, down 2.1%, with full-year sales expected to finish around 16 million. The annualized figure expresses the quarter’s selling pace as a yearly rate. Although the market was expected to finish slightly below 2025, demand remained stronger than anticipated, supported in part by customers better able to absorb high prices.

There is some encouraging news for payment-conscious shoppers: Manufacturers are increasing incentives. Bloomberg, citing JD Power, reports average spending of nearly $3,600 per vehicle, up 7.3% from a year earlier. September incentives were projected to equal 6.9% of sticker price. Those discounts can help reduce the amount a buyer must finance, although manufacturers have continued to avoid the steep incentives common before the pandemic.

Even luxury shoppers are watching prices. Welch reports that Mercedes-Benz North America CEO Jason Hoff told the Automotive News Congress in Detroit that premium customers are scrutinizing sticker prices. Apparently, a comfortable bank balance does not make an uncomfortable car payment any more appealing.

Bloomberg also reports that Toyota and Hyundai are growing with help from gasoline-electric hybrids and multiple models starting below $30,000. Hyundai North America CEO Randy Parker described consumers trying to stretch their dollars and credited the company’s continued commitment to passenger cars. Their performance underscores the importance of giving shoppers choices at lower prices.

For buyers, the estimated $821 average payment is the central concern. It is an average, so individual payments will vary, but it demonstrates the pressure facing households shopping for a new vehicle. Welch reports that Cox executive analyst Erin Keating sees buyers becoming tired of waiting for affordability to improve and moving ahead because they still need transportation. That need helps keep sales moving. It does not make nearly $10,000 a year in car payments any easier to manage.