Growing share of car buyers pays $1,000 or more a month for loans

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A growing share of car buyers are signing up for monthly payments of $1,000 or more amid rising interest rates and high auto prices, a new study finds.

Overall, 14.3% of consumers who financed a new vehicle in Q3 committed to making payments equal to or greater than that amount, up from 8.3% during the same period in 2021, according to Edmunds. . For buyers of electric vehicles, the share is 26%; for hybrids, 24%.

“High prices and rising interest rates are giving consumers a boost by catapulting monthly payments into a new realm,” said Jessica Caldwell, chief information officer at Edmunds.

The interest rate on new auto loans hit 5.7%, from 4.3% a year ago, according to data from Edmunds. And with the Federal Reserve should continue to raise interest rates to combat the persistence inflationauto loan rates could be even higher.

The average price paid for a new car is nearly $46,000

The average price paid for a new car in the third quarter was $45,971, according to an estimation from JD Power and LMC Automotive. Although there are signs that the market is cooling, this amount is 10.3% higher than the same period in 2021.

Contributing to these higher prices, incentives to sell manufacturers are minimal. In September, the average discount was around $936, down 47.8% from a year earlier, according to JD Power/LMC’s estimate.

“Lack of inventory, coupled with strong demand, continues to allow manufacturers to maintain a low level of discounting,” said Thomas King, president of the data and analytics division at JD Power.

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Continued inventory shortages are also partly responsible for the high prices, as have consumer preferences that have changed over the past decade.

“We’ve seen Americans adopt a bigger-is-better mindset by turning to larger vehicles,” Caldwell said, adding that these cars also come with more comfort and advanced technologies, which cost more.

Trade-in values ​​help reduce loan amounts

While it’s hard to know what credit score a lender will use – they have options – having a general goal of avoiding bumps on your credit report helps your score no matter which one you use, experts say .

“Some of the easiest ways to boost your credit score include checking your credit report for errors and keeping your open accounts in good standing – the latter means paying all your credit bills on time and in full every month,” said Jill Gonzalez, analyst and gatekeeper. -word of personal finance website WalletHub. .

“You can also improve your score by keeping unused accounts open, as this helps build a long credit history, which is essential for a good credit score,” she said.

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