The share of new auto loans with monthly payments exceeding $1,000 has hit a new record as borrowing costs continue to rise and new car prices remain elevated. Consumers are taking on too much auto debt, which could have disastrous consequences during the next economic downturn.
Edmunds’ second-quarter vehicle transaction data shows that 17.1% of consumers who financed a new car signed on for four-figure monthly payments. This now stands at a record high, up from 12.2% a year earlier. Before Covid, the figure was around 4.3%.
“The double whammy of relentlessly high vehicle pricing and daunting borrowing costs is presenting significant challenges for shoppers in today’s car market,” Ivan Drury, Edmunds’ director of insights, told Detroit Free Press.
Drury continued, “The Federal Reserve’s recent pause in interest rate hikes, unfortunately, didn’t offer much relief for consumers, and hints at further raise later this year mean auto loan rates could even continue to increase.”
Average monthly payments also reached a new record of $733. That compares with $730 in the first quarter and $678 in the second quarter of 2022. Buyers were financed with an average APR of around 7.1%, the highest since the fourth quarter of 2007.
The average financed amount still topped $40,000 for the fifth consecutive quarter at $40,356.
People are swimming in debt:
2 out of every 3 consumers who agreed to a $1,000+ monthly payment in Q2 signed up for an average APR between 8.5% and 9.6%. (via Edmunds)
🙃
— CarDealershipGuy (@GuyDealership) July 6, 2023
As for buyers who took on $1,000 monthly auto payments, about 65% of them had an average loan-term range of 67 months and 84 months, their average APR rate was between 8.5% and 9.6%.
“There are better ways and worse ways to spend $1,000 per month on a car note,” Drury said.
He warned, “Consumers who are paying large amounts of finance charges could be in jeopardy of falling into a negative equity trap, so it’s critical to come to the table with a comprehensive budget and a feel for the financing elements of a car purchase beyond the monthly payment, including the APR.”
We have explained American Drivers Go Deeper Into Debt As Inflation Pushes Car Loans To Record Highs, which might spark a crushing auto loan crisis in the arrival of the next recession. Consumers are once again trapped. It’s not just us saying this — Goldman has warned clients about the faltering consumer.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
I haven’t had a car payment in 35 years.
Mine was paid off in 1980.
I’ve bought used cars for cash ever since and kept them until they died. Last pickup I drove for 26 years.
The majority (all?) of these people are fucking morons.
Bury them selves in debt so they can drive the latest blinged out ride.
PS; love the handle, I’m married to an accountant so I got it right off.
That’s some stupid stuff right there making a $1000 month car payment. Plus anything new and shiny like that gets beat up with dings from other lazy drivers opening their doors on the sides of the new and shiny like at Wal Marts parking lots and many others of course.
Then there is insurance. Homeowners and auto insurance are up close to 40% in Texas over 2022 renewals. I’m down to liability only on the old 290 grand miles on the old PU. Fuck the Jones. Just fuck ‘em. I’m in “competition” with no one. Don’t care.
If you ain’t got no $1,000 car payment, you ain’t got no money anyhow.
I paid $30,ooo for my first house with a much lower interest rate and apr. Those kind of payments are crazy, and don’t forget if you finance you need “gap insurance” when you drive it off the lot today unless you put down a huge down payment or lease.(Rent to give back!)
Even if you buy something new, it’s worth it if you maintain it well and drive it for something like 26 years the way you have. Our current vehicles are a 2000 and 2012. We have no intention of replacing them anytime soon. We have also always been very “underinsured”. All we ever is get is the minimum required to put the vehicle on the road. We’ve never had any accidents or claims.
I hear ya. 2002 PU purchased used with 50k . I’d never owned a vehicle with so many gadgets and “technology”, automatic windows but I’d take roll ‘em ups I assume are defunct now. 2016 , new, and at 119k I anticipate another 119k. I bought a nice ride for me wife.
The only thing about underinsured is if you are at fault with minimum liability as required by “law”, that liability maximum won’t go far on the $60-100k vehicles on the roads now. I raised liability on both vehicles to the next level above minimum and forget the amount but still it’s not going cover a totaled $60k vehicle. Lawsuit? The extra coverage was not a lot more but I dropped collision and comprehensive on the old PU. It’s a chance I take. Should I hit a deer and crash into a tree it’s on me.
Anyway, I was just at a Porsche dealer looking to make a deal on a 468 HP V8 Porsche Cayenne SUV. Kidding. It’s advertised as a vehicle one can drive 1000 miles straight on through no sweat it’s so comfortable. About $96k. Yahoo!
It used to be worth if you buy something new, not anymore. Bought a new 2011 Tacoma 4 wheel drive with a 5 speed anti-theft device. Very basic truck, nothing electric paid 18 and some change. Besides regular maintenance only had to put 1 set of brakes and some tires. Has a little over 100,000 and still runs like a champ. I couldn’t afford a new Tacoma today not that I want one. I’m retired and that truck will last me until I’m planted.
Vehicles have reverse bell curves…
Expensive when new…
Depreciate to very little…
Then the values go back up to being even more expensive than when new, as they become old and collectable.
My goal is to make all my vehicles collectables.
A work in progress,and a whole lot less expensive than a $1,000/month car payment!!!
You’re such a special boomer. Give yourself a pat on the back.
Thx Flash!
Already did.
But it is not just new. A new truck can cost $80 – to $90 grand. But used vehicles are out of sight too.
I needed a new truck and got one for a decent price, but the average used pickup was $33-$ 35 thousand with 80- 100,000 miles on it. That was to steep for me as I too paid cash for one with less than 50,000 miles.
At my age I am hoping it is the last vehicle I ever have to buy. I don’t drive that many miles a year now that I am retired so this should last me over ten years with proper maintenance.
No electric vehicles for me
I had my last one in 1975 – a Toyota Camry 2000- 3 sped auto, in a mustard color.
Brought off a concreter in a really bad recession. I was 21 years old and a credit union where I worked got repaid in 4 months. They hated me from then on…… Good!
It was because of Hewlett Packard’s new hand held computers HP 25… Hp 65 … I brought shares with very limited funds but kicked it out of the park and state. A $3000 investment went $6090 in a year.
I paid $1500 for a near new Vehicle . It set me up for life.
Even my Father said …. “That was your Golden Ticket to life Son” and despite a divorce, it was.
I got a 20 year old duramax diesel one ton 4×4 about 70k miles runs like a champ tows anything and gets 20 mpg. Backup is a 93 Suburban 2500 4×4 . Both paid cash for years ago. My buddy has a 85k new duramax , it’s pretty but choked by emissions and def fluid bullshit.
I have a 2002 Silverado 2500HD with the Duramax. 372,000 miles and counting.
That’s outstanding. I keep mine stock but added air dog lift pump and always use Rotella T6 and change filters religiously. Great trucks LB7 great motor.
And, as we saw last spring (2022) when the government cut the nitrogen fertilizers by 20%, that BlueDef became scarce (it’s apparently a by-product of the making of the nitrogen fertilizer) … and all diesels since 2010 (?) are required to use it … or else your truck won’t truck.
My neighbor says that knowledgeable mechanics can work around that issue … but I’m guessing that it costs a lot of ca$h to do that … we used to get our Class 8 diesels tweaked — and it cost us $2,500 per …
totally off topic except that it is about debt —
china is in default to american bondholders to the tune of nearly a trillion $ —
should we take steps to try & make them pay?
the brits did & they are paying —
https://thehill.com/opinion/international/4075341-china-is-in-default-on-a-trillion-dollars-in-debt-to-us-bondholders-will-the-us-force-repayment/
I’m sure they’ll keep making those $1000 payments when they have to start paying their student loans again in a couple months. Good time to be a repo-man?
They should just pay cash for clunkers.
Oh, wait . . .
That is one reason used cars became so expensive. Unintended consequences.
I think not.
$1000 monthly car payments is just nuts.
84 month loan – I remember when they went from 36 month to 48 month loans and I thought that was bad.
As I’ve always said, The car you pay cash for is the car you can afford.
In China you can still buy a basic transportation car for about $3000.00. While our standard of living is deteriorating, theirs has improved every year for the past two decades. Our present course ends in public uprising and possible Civil War.
One word…. Come in Suckers