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Affordability of New and Used Vehicles Falls

Interest rates increasing the costs, with no end in sight, Edmunds finds.

October 4, 2023
Affordability of New and Used Vehicles Falls

Several record highs were set in the third quarter, including the average used-vehicle down payment of $4,111.

IMAGE: Pexels/Raten Kauf

2 min to read


In the third quarter, vehicle borrowing costs reached highs last seen during the Great Recession, while average monthly payments hit records, according to Edmunds findings.

The average annual percentage rate for new vehicles rose three percentage points quarter-over-quarter to 7.4% as the used-vehicle average APR increased two points to 11.2%.

"Spiked interest rates remain the biggest impediment to affordability in both the new and used car markets today,” said Edmunds Head of Insights Jessica Caldwell.

Meanwhile, the percentage of borrowers with monthly payments for a new vehicle of at least $1,000 reached a record high of 18%, surpassing the previous record of 17% in the second quarter. The average monthly payment also broke a record at $736.

The average down payment on a used vehicle set a record, too, at $4,111, Edmunds said.

The end of the vehicle affordability quandary may not be in sight, Caldwell said, citing potential additional interest rate increases and the United Auto Workers strike in Detroit. The strike, she pointed out, could "wipe out any inroads made on inventory and the return of incentives, further elevating pricing,” at least for the big three automakers based there.

Zero-percent financing, though still being advertised in places to “draw shopper attention,” has all but disappeared, Edmunds pointed out, representing just 1% of third-quarter transactions after peaking in the second quarter of last year at 24%.

LEARN MORE: Dollar Streched Thin on Used Models

 

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