Average Car Loan Interest Rates Hit 10-year High
Mar 20th, 2019 @ 10:09 AM by Amber Nelson
Americans love their big trucks and SUVs and that affection is driving average auto loan interest rates to highs not seen in a decade, according to Edmunds.
As vehicle prices continue to climb, lenders have been increasing the number of low or zero interest rate programs, which has in turn pushed overall new-vehicle auto loan rates up to 6.3%. That’s up 1% from last year and it is the highest average since February 2009. Edmunds reports that only 18% of buyers received a rate under 3%, a huge fall from roughly 25% a year ago.
And even though costs are rising, car buyers are largely unwilling to change their vehicle preferences for less expensive compact or midsize vehicles. “We really haven’t seen people make too many concessions in the style of vehicle they’re looking for. While there’s alternatives out there that are more affordable, it doesn’t look like that’s where shoppers are flocking,” said Jeremy Acevedo, Manager of Industry Analysis for Edmunds.
Instead buyers are contributing bigger down payments to pull down vehicle costs. The average down payment rose 6.6% to an average of $4,187 in February. The average price for new vehicles rose 4% to $36,331, while the average financed amount was $32,071, a 2.4% increase from February 2018.
SUVs and trucks are among the most expensive vehicles. “In the past, finance arms have been able to maneuver and manipulate to make these vehicles affordable. Those options are running out,” Acevedo said. Monthly auto payments jumped 5.5% in February to an average of $556 with an average loan term of 69 months. With the average term stretched to almost 7 years and the average payment making up roughly 10% of the monthly average American income, there is little wiggle room for lenders to ease those loan burdens.
Leasing, once considered a less-expensive way to get into a new-vehicle, has also seen dramatic price increases. Lease payments have risen as much as 26% since 2016, a result of climbing vehicle prices.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.