Car Payments Soaring Past $1000 For Nearly 1 in 5 New Car Buyers
From eggs to beer to backordered bicycle parts, everything seems expensive these days. I can't go more than a day without scratching my head and thinking, "Is it just me, or is everything expensive as heck?"
It seems I'm not alone.
Soaring interest rates and high demand have led us here: the average car payment in America reached $730 this month, while a growing number of Americans (17 percent) now pay more than $1000 per month for their vehicle. Car and Driver has more detailed information here. That's a staggering set of numbers, as it was only a decade ago those sort of payment figures were largely unheard of in the mainstream market.
According to the C/D piece, it's not British supercars, but truck and SUV payments steering new members into the $1000/mo. club, especially in states like Texas and Wyoming, where demand for trucks is high and interest rates are soaring past seven percent.
Plus, market factors aren't helping. The most popular new cars are still in short supply, and transaction prices are hitting record highs. Some auto execs expect the nationwide average to reach $50,000 soon. The wistful among us will remember when $50,000 bought you a very nice BMW 5-Series. Now many vehicles without an imperious German badge on their nose reach $50,000 by default.
This moment feels curiously similar to those leading up to the Great Recession of roughly 2007-2009 and the mini recession that followed four years later. Though in this case, it's auto loans we're focusing on, not subprime mortgages. And yet, a pattern exists.
Lending institutions are allowing Americans to take on unprecedented debt to get into new cars, offering seven-year loans to amortize the huge cost, all while the Federal Reserve hikes interest rates to rein in inflation. There's a dearth of good used vehicles on the road too, which has increased their price markedly. Cars are just plain expensive now, no matter where you look.
If you've got something dependable and used, you may just hang on to it for the time being, instead of chaining yourself to a huge monthly payment as economic uncertainty looms. Working backward from your needs is always a smart way to shop, and has always helped me make smarter car buying choices. For those in need of a new car, there are plenty of excellent budget options available well below $40,000. Even sports cars (or sporty practical cars).
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