New car prices: average monthly payment hits new high

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The average monthly payment for Americans buy new cars climbed to $748 in October, an all-time high.

In October, new vehicle transaction prices were actually just below the record high reached in August. But taking today’s higher interest rates into account, it has never been more expensive to buy a car, according to a report Wednesday from Kelley Blue Book (KBB).

The average transaction price for new vehicles rose $187 from September to October to $48,281, the vehicle appraisal company reports. That’s slightly lower than August’s record high of $48,301, but new car prices are $1,775 higher than a year ago.

Monthly payments on new cars averaged $743 in August, a few dollars lower than the new high reached in October. For comparison, in October 2021, the average payment for a new car was $680.

A large portion of car buyers make monthly payments well above average. More than 14% of Americans who financed a new vehicle in Q3 2022 pledged to monthly payments of $1,000 or morean increase from just over 8% a year earlier, according to Edmunds.

Federal Reserve officials have expressed hope that car price growth will slow after the recent interest rate hikes and like vehicle inventory improves. Higher interest rates make it more expensive to finance the purchase of a vehicle through a auto loanwhich in theory should drive some potential buyers away from the new car market, lowering demand and easing some of the upward pressure on prices.

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New car prices remain extremely high

The rise in new car prices in October comes after several data points showed prices have gone down from August to September, which was the first time they had fallen in five months. This drop may have raised hopes that prices were finally on a downward trajectory, but for anyone waiting for new cars to get cheaper, it’s a bad sign that the average price is back to just $20 below the all-time high. .

Used vehicle prices have been falling for several months now, with the latest consumer price data posting a decrease of 2.4% from September to October. The data illustrates the divergence in price trends for new cars versus used cars, with new car prices rising 0.4% in October.

Car loan interest rate rose in October in response to higher Fed rates, KBB reports. The combination of high interest rates and high prices is making it harder for Americans to afford to drive, Jonathan Smoke, chief economist at KBB parent company Cox Automotive, said in the report.

Cox tracks vehicle affordability in partnership with Moody’s Analytics based on the number of weeks of median household income it would take to pay for an average new car, including interest. This figure increased to 42.8 weeks in October, compared to around 40 weeks a year ago and around 33 weeks in October 2020.

“Higher rates are already shifting access to vehicles and financing to wealthier consumers,” Smoke said. “Affordability will be challenged for years to come, both in the new and used market. It’s not the Fed’s fault, but it will impact consumer access to transportation.

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Elaine R. Knight