As Interest Rates and New Vehicle Prices Rise, Loan Terms and Payments Reach for the Sky

Steph Willems
by Steph Willems
as interest rates and new vehicle prices rise loan terms and payments reach for the

Image, for a moment, that the trailer pictured above is filled with debt. It’s a good representation of the average new vehicle purchase.

Looking at last month’s stats, you’d have to go back to the safe and comfortable pre-Twitter era to find a January in which fewer people got their hands on a zero percent new vehicle loan. January 2006, to be exact.

Last month wasn’t just a departure from a decade past — the car buying landscape appeared quite different just a year ago, all thanks to rising interest rates and the perpetual upward creep of new car pricing. Data from Edmunds helps break down the differences.

Suffice it to say you’re likely paying a lot more, but you’re spreading it out over a longer term.

Last month, the average new vehicle buyer borrowed $31,707 and financed the vehicle over an average term of 69.1 months. That’s up from 61 months in 2010, and 68 months a year ago.

While a longer term helps get buyers into the vehicle of their dreams, it widens the siphon on their bank account, especially considering the average APR in January — 6.19 percent — was up 1.2 percentage points over last January’s average (4.9 percent). Your average American financed their new car purchase with payments of $551 last month.

Average down payment? $4,191.

As mentioned already, finding a low-interest loan has become more difficult than sourcing a compatible mate online. Only 3 percent of new car buyers secured a zero-percenter in January. It wasn’t all that long ago, explains Edmunds Executive Director of Industry Analysis Jessica Caldwell, that more than one in five Americans could walk away with a zero percent loan. The highest concentration of said loans (22 percent) took place in March 2010, she tweeted.

On the higher end, the number of Americans agreeing to loans of more than 10 percent is on the rise, with 12.3 percent of new-car buyers taking on a double-digit APR in January. That’s up sharply from 9.5 percent of buyers just a year ago.

It’s no wonder why we’re seeing buyers flood the used vehicle market — and why certain segments of that market (mainly, small cars) are rising steeply in value. (It’s also no wonder why American auto loan debt has swelled to nearly $1.3 trillion.) The average monthly loan payment for a used car was $407 last month, Edmunds data shows.

[Source: CNBC] [Image: Fiat Chrysler Automobiles]

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  • Arthur Dailey Arthur Dailey on Feb 06, 2019

    I'll use Canadian statistics. The average car in Canada is according to on line research 9.66 years old. There were a grand total of 1.4 vehicles registered in all of Canada that were over 20 years of age. So cars do not last 20 years in Canada, with very statistically rare exceptions. Yes, you can expect a 'new' car to last 10 years. After that??? And what is the cost of maintaining a car that is 10+ years old? And the impact of rust on its structural integrity? Yet I have one vehicle that is now over 9 years old and I hope to keep it running reliably for another 4 to 5 years. It is Krowned annually. However I have another vehicle that is now 13 years old, that we have decided to 'give away'. We were offered at most $500 for it. Despite numerous new or nearly new parts. We decided that the cost of maintaining it, and the fact that we do not 'trust it' for bad weather, long distance trips have made investing any more time or money into it to be a 'waste'. And we have learned what many have said, that the owner is more important than the make or model regarding long term reliability.

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  • Jeff S Corey--We know but we still want to give our support to you and let TTAC know that your articles are excellent and better than what the typical articles are.
  • Jeff S A sport utility vehicle or SUV is a car classification that combines elements of road-going passenger cars with features from off-road vehicles, such as raised ground clearance and four-wheel drive.There is no commonly agreed-upon definition of an SUV and usage of the term varies between countries. Thus, it is "a loose term that traditionally covers a broad range of vehicles with four-wheel drive." Some definitions claim that an SUV must be built on a light truck chassis; however, broader definitions consider any vehicle with off-road design features to be an SUV. A [url=https://en.wikipedia.org/wiki/Crossover_(automobile)]crossover SUV[/url] is often defined as an SUV built with a unibody construction (as with passenger cars), however, the designations are increasingly blurred because of the capabilities of the vehicles, the labelling by marketers, and electrification of new models.The predecessors to SUVs date back to military and low-volume models from the late 1930s, and the four-wheel drive station wagons and carryalls that began to be introduced in 1949. The 1984 [url=https://en.wikipedia.org/wiki/Jeep_Cherokee_(XJ)]Jeep Cherokee (XJ)[/url] is considered to be the first SUV in the modern style. Some SUVs produced today use unibody construction; however, in the past, more SUVs used body-on-frame construction. During the late 1990s and early 2000s, the popularity of SUVs greatly increased, often at the expense of the popularity of large [url=https://en.wikipedia.org/wiki/Sedan_(automobile)]sedans[/url] and station wagons.More recently, smaller SUVs, mid-size, and crossovers have become increasingly popular. SUVs are currently the world's largest automotive segment and accounted for 45.9% of the world's passenger car market in 2021. SUVs have been criticized for a variety of environmental and safety-related reasons. They generally have poorer fuel efficiency and require more resources to manufacture than smaller vehicles, contributing more to climate change and environmental degradation. Between 2010 and 2018 SUVs were the second largest contributor to the global increase in carbon emissions worldwide. Their higher center of gravity increases their risk of rollovers. Their larger mass increases their stopping distance, reduces visibility, and increases damage to other road users in collisions. Their higher front-end profile makes them at least twice as likely to kill pedestrians they hit. Additionally, the psychological sense of security they provide influences drivers to drive less cautiously. https://en.wikipedia.org/wiki/Sport_utility_vehicleWith the above definition of SUV any vehicle that is not a pickup truck if it is enclosed, doesn't have a trunk, and is jacked up with bigger tires. If the green activists adhere to this definition of what an SUV is there will be millions of vehicles with flat tires which include HRVs, Rav4s, CRVs, Ford Escapes, Buick Encores, and many of compact and subcompact vehicles. The green movement is going to have to recruit millions of new followers and will be busy flattening millions of tires in the US and across the globe. Might be easier to protest.
  • Sckid213 I actually do agree that most Nissans are ultimately junk. (I also think many BMWs are also). I was talking challenging the 3 in terms of driving dynamics. Agree all were failures in sales.
  • THX1136 More accurately said, we are seeing exponential growth in the manufacturing capabilities in this market. Unless, of course, all those vehicles are sold with customers waiting until more a produced so they can buy. Indeed, there are certainly more EVs being purchased now than back in 2016. Is demand outstripping manufacturing? Maybe or maybe not. I sincerely don't know which is why I ask.
  • ToolGuy The page here (linked in the writeup) is ridiculously stupid https://www.tyreextinguishers.com/how-to-spot-an-suvLike, seriously stupid, e.g., A) Not sure that particular Volvo is killing the planet as quickly as some other vehicles we might choose. B) A Juke is "huge"??? C) The last picture shows a RAV4 Hybrid?
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