If you can even find a new car to buy, it will actually cost you to buy it.
“It’s a really difficult time to buy a car” said Jessica Caldwell, Executive Director of Insights at Edmunds.
Limited inventories due to an ongoing shortage of computer chips, along with other supply chain challenges, helped push new car prices up 12.6% year over year and used car prices up 16.1%, according to the latest data from the US Bureau of Commerce laboratory statistics.
According to a separate forecast by JD Power/LMC Automotive, the average transaction price for new cars will hit an all-time high of $45,844 in June.
Rising interest rates mean higher borrowing costs
At the same time, it is also becoming more expensive to finance any type of vehicle, as the Federal Reserve’s recent interest rate hike of 0.75 percentage points is driving up the cost of auto loans.
“Low interest rates used to be one of the few reprieve for car buyers in the face of increased prices and supply shortages,” Caldwell said. “But the Fed’s rate hikes this year are making funding stimulus far more costly for automakers, and consumers are starting to feel the pinch.”
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The average APR on a new car hit 5% for the first time since early 2020, according to June data from Edmunds.
While an increase of about a percentage point may not seem like much, a jump from 4% to an APR of 5% could cost consumers $1,324 more in interest over the course of a 72-month $40,000 car loan, Edmunds experts said.
And yet, luxury buyers are flocking to dealerships willing to spend more on high-end cars and the financing that goes with them.
For the first time, just over 12% of consumers financing a new car in June committed to a monthly payment of $1,000 or more — the highest on record — compared to 7.3% a year ago, Edmunds found .
“Although there seems to be a steady stream of affluent consumers willing to commit to car payments that look more like mortgage payments, the new car market is growing increasingly out of reach for most consumers,” Caldwell said.
With the lucrative luxury SUV segment in high demand, more automakers are upgrading their lineups and downsizing smaller cars, Caldwell noted.
“At the lower end, there aren’t many options.”
Taking into account near-record gas prices, the affordability issue isn’t going to improve anytime soon, she added.
Typically, dealers offer some incentives to offload excess inventory before new models hit the lot, but not this year.
“Don’t expect many sales at the end of the summer; there really isn’t any inventory to clear at this point,” Caldwell said. “If you’re going to wait for prices to improve, it’s probably going to take a while.”
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https://www.cnbc.com/2022/07/05/luxury-car-buyers-pay-more-than-ever-as-prices-and-loan-costs-rise.html Luxury car buyers are paying more than ever as prices and borrowing costs rise