Auto loan rates for new cars set record highs in April
APRs are rivaling pre-recession levels and costing auto consumers more.
An analysis by Edmunds shows that auto loan financing for new vehicles was a little more expensive in April due to rising rates that reached an average APR of 5.6%, up just over a half a point from April 2017 when rates stood at 5%.
This marked the third consecutive month that auto loan rates topped 5%. The recent rises in auto loan interest rates rival pre-2009 recession levels.
Rising interest rates and lower sales for April followed a first-quarter sales record.
Edmunds reports that when auto sales were compared year for year in April, the auto industry took a beating, with sales dropping 5%. This followed a strong first quarter that was actually one for the record books.
General Motors’ sales fell less than average at 3%, while Ford also stayed slightly ahead of the industry average at 4%.
The slump comes after a record month of sales in March, which was the highest in more than a year with 1.65 million vehicles sold. Some speculate that early tax refunds could be a reason for the record number of sales in the third month.
The average price for a new vehicle also increased in April, and SUVs saw even higher price increases. Consumers paid an average monthly note of $535 for new vehicles in April compared to last April’s average of $509. Overall, buyers can expect to pay an average of $6,500 more than they did five years ago.
Jessica Caldwell, Edmunds executive director of industry analysis, cautioned that the trend of higher auto loan rates may be a new normal. Consumers should expect to dig deeper into their pockets and pay higher interest rates, as the trend is expected to continue. Monthly payments will rise along with the rates.
The forecasted increases come after the Federal Reserve announced that it expects two to three additional rate increases for the year. This translates to even higher interest rates for car consumers as the year goes on.
Buyers taking measures to lower their auto loan costs.
Many new car buyers are taking matters into their own hands to keep their auto loan notes more affordable and manageable. Some are taking out longer loans while others are making larger down payments.
The average down payment for April came in at $3,911, and many buyers are committing to lengthier loan terms, some as long as nearly six years. After down payments, buyers are financing an average of $31,318 for new vehicles, up from $30,315 in April 2017.
The rates for used autos also saw an increase and climbed to 8.3%. On average, buyers financed $21,620 for used automobiles.
Auto loan rates aren’t the only ones that are inflated. Mortgage interest rates are also on the rise.
If you want to lock in the current new auto rates before they go any higher, compare car loans for new cars to see how you can get the best deal out there.