Car Loan Interest Rates Fall to 22-Month Low
Jan 29th, 2020 @ 11:32 AM by Amber Nelson
The average interest rate on a U.S. car loans fell to its lowest point since February 2018 in December, according to automotive data-tracking company Edmunds. At the same time, prices on new vehicles have reached near-record highs.
The annual percentage rate (APR) for a new-vehicle loan slipped to 5.4% in December, down from 5.5% in November and down from 5.9% a year earlier. Rates have been falling over the past year in response to the Federal Reserve’s three consecutive rate cuts in 2019.
For those with the best credit, auto lenders made even better rate deals in December. Edmunds reported that 22.4% of all car buyers were offered an interest rate under 3%. That’s down compared to only 20.4% of buyers getting such deal a year ago.
“Automakers and dealers gave new car buyers a lot of reasons to feel some holiday cheer in December,” said Jessica Caldwell, Edmunds Executive Director of Insights. “Everyone knows new car deals are usually sweetest at the end of the year, but it’s been a long time since financing offers were this good.”
However, as interest rates have been decreasing, prices on new cars have pushed higher to an average of $37,183 in December. That represents a 30% jump over the past decade; overall consumer prices only rose 20% over that same period.
Today the average monthly car payment is up to $577, a 3.4% increase from December 2018.
A good deal of the December increase in average sales price is due to consumers trending more towards trucks and SUVs and buying fewer sedans and compact cars. New cars also include much pricier technology today.
“The December numbers aren’t always indicative of larger market trends because people tend to buy pricey luxury vehicles, trucks and SUVs this time of year. This drives up the average transaction price and lowers the average APR since these shoppers can usually qualify for the lowest promotional rates,” Caldwell added. “But the fact that rates have been on a steady decline for the last several months bodes well for more favorable financing conditions in 2020.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.