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Business car sales go up

Finding a new car in budget just became a little harder as interest rates reach new highs. (Photo by Sean Gallup/Getty Images)

By Hannah Bryan Leaders Staff

Hannah Bryan

Hannah Bryan

News Writer

Hannah Bryan is a news writer for Leaders Media. Most recently she was a reporter for the Sanilac County News...

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Nov 7, 2022

Driving Up the Cost of a New Car

As the inventory of available vehicles increases, buyers are hit with a new obstacle—higher car-loan rates. 

Key Details

  • Annual percentage rates on the typical new car loan reached 5.7% in the last month, according to automotive site Edmunds.
  • If trends continue, new vehicle costs will rival expenses from early 2009.
  • Potential buyers who have been waiting for prices to come back down may continue to wait now that high rates are a deterrent. 

Why it’s news

There are fewer budget-friendly options for potential car buyers, especially as general expenses increase. 

Previously, supply chain issues and a shortage of semiconductor chips drove the high car prices, but now that these issues are resolving, high prices remain. 

The average amount financed when buying a new vehicle is also on the rise. In April 2019, the average was $31,914. Now that amount has risen 27% to $40,438. 

Average monthly payments on car loans is now more than $700—and 14.3% of buyers have a record high monthly payment of $1,000 or more. 

“High prices and rising interest rates are dealing consumers a one-two punch by catapulting monthly payments into a new realm. With new vehicle purchases, automaker subsidies offer a bit of relief, but even those are far less generous than before. Consumers heading into the car market may be aware of high prices but also need to brace themselves for a different experience in the F&I (finance and insurance) office,” says Edmunds executive Jessica Caldwell.

Backing up a bit

Auto sales aren’t the only area affected by high interest rates. Growing mortgage rates are affecting home sales, driving away buyers, and lowering demand. 

As mortgage rates inch closer to 7%, both buyers and sellers are only entering the market out of necessity. Homes are still selling, but it may take time. Buyers can once again negotiate prices down.

Overall, it appears that interest in home buying is on a downward swing. Google searches for “homes for sale” are down 32% from the same time last year. 

The Redfin report found that requests for home-buying services and requests for tours have fallen 31%. Tours themselves are down 25% just from the beginning of this year. 

Applications for mortgages are down 5%.

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