That’s Grand: Record Numbers of Car Payments Exceed $1,000/mo

Matthew Guy
by Matthew Guy

If you’re thinking that an ever-climbing percentage of the average household income is being allocated toward car debt – you’re exactly right. According to third-party industry watchers, the number of notes with a monthly payment of $1,000 or more has risen to record heights.

How many? A notable 15.7 percent of new vehicle customers signed on the dotted line for four-figure payments in the fourth quarter of 2022, according to Edmunds. That’s compared to 10.5 percent during the same timeframe in 2021 and just 6.7 percent in 2020. Frankly, that’s a terrifying jump. And it’s not just new cars. Edmunds estimates 5.4 percent of consumers who financed a used vehicle in the last quarter of 2022 committed to a $1,000+ monthly payment, also a record high, compared to 3.9 percent in Q4 2021 and 1.5 percent in Q4 2020.

Paradoxically, consumers are apparently making bigger down payments than ever before. Edmunds says the average down payment for new and used vehicles hit record highs in the last quarter of 2022, climbing to $6,780 and $3,921, respectively.

So what’s driving the increase? Multiple factors, it seems. New and used car prices remain high, of course, despite cooling off in recent weeks. CNBC reports the average price paid for a new car in December set a record of $46,382, according to a separate estimate from J.D. Power. Interest rates are also quite high compared to just one year ago, which doesn’t help matters, with Edmunds pegging the average APR last quarter at 6.5 percent on new and a face-shattering 10 percent on used.

And there are apparently still a host of people dense enough to roll in significant amounts of negative equity into their new loans. Again, from Edmunds: 17.4 percent of new vehicle sales with a trade-in had negative equity in Q4 2022, up 2.5 percent from one year prior, with the average amount owed on in-the-ditch loans was $5,341 in Q4 2022 compared to $4,141 in Q4 2021. Here's a quirk, though – 31.5 percent of loans had negative equity in Q4 2020, though the average amount was $5,059 in that same quarter which is ever so slightly less than in 2022.

We can only guess what the amounts of negative equity will be in Q4 2023 and Q4 2024 when buyers who purchased vehicles at inflated values over the last couple of years begin to try and trade their rides. Additional dealer markup, a common practice by some greedy dealerships in the last 24 months, will assuredly drive negative equity even higher in the months and years to come.

One other wrench in the works? Edmunds also reports that an increasing number of luxury car shoppers are choosing to buy instead of lease, falling to 26 percent of transactions from well over 50 percent in 2019. Extra six-figure vehicles are suddenly included in the mix will surely skew the data.

[Image: osonmez2/]

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Matthew Guy
Matthew Guy

Matthew buys, sells, fixes, & races cars. As a human index of auto & auction knowledge, he is fond of making money and offering loud opinions.

More by Matthew Guy

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3 of 35 comments
  • 2ACL 2ACL on Jan 11, 2023

    What's crazy to me is that wheeling and dealing with negative equity is still a thing, especially since valuations only recently began declining.

    • Sgeffe Sgeffe on Jan 11, 2023

      The negative equity is just going to become even more of a vicious circle!

  • Mikedt Mikedt on Jan 12, 2023

    As I sit in traffic surrounded by pickups I know are exceeding 70k in cost, I'm not the least surprised.

  • Mike Some Evs are hitting their 3 year lease residual values in 6 months.
  • Tassos Jong-iL I am just here for the beer! (did I say it right?)
  • El scotto Tim, to be tactful I think a great many of us would like a transcript of TTAC's podcast. 90 minutes is just too long for most of us to listen. -evil El Scotto kicking in- The blog at best provides amusement, 90 minutes is just too much. Way too much.
  • TooManyCars VoGhost; I was referring more to the Canadian context, but the same graft is occurring in the US of A and Europe. Political affiliation appears to be irrelevant.
  • The Oracle Going to see a lot of corporations migrating out of Delaware as the state of incorporation. Musk sets trends, he doesn’t follow them.