More People Than Ever Paying $1K A Month For New Cars In Q3 2023

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Average monthly new and used car payments remained elevated last quarter. Shoppers paid $30 more a month for new cars, while used car payments dipped by $2.

New car buyers spent more monthly to finance less, with the interest rate rising and the term shortening. In Q3 2023, buyers financed, on average, $40,149 for 68.4 months, paying $736 a month with a 7.4 percent APR. During the same quarter last year, people would pay $703 per month at 5.7 percent for 70.3 months on $41,347.

 New, Q3 2023Used, Q3 2023
Term68.470.1
Monthly Payment$736$567
Amount Financed$40,149$29,328
APR7.5%11.2%
Down Payment$6,907$4,111

Used car monthly payments fell slightly last quarter to $567 compared to Q2 2023, but they remain elevated from the $565 people were paying in Q3 2022. The average amount financed for a used car also fell to $29,328, down from $31,367 in Q3 2022 and $29,665 in Q2 2023.

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A record number of new car buyers signed up to pay $1,000 a month or more for their vehicle in July, August, and September. The share of those consumers increased from 17.1 percent to 17.5 percent in the last quarter.

Rising interest rates are a driving force behind the record-high monthly car payments. The APR on used cars averaged 11.2 percent over the last three months, up significantly from the 9.0 percent last year. The average APR for new cars is up nearly two percent.

The last time interest rates reached these averages was in 2007, hitting 7.4 percent for new cars and 11.4 percent for used. Average down payments have also grown for both used and new car shoppers. The average is $6,907 for new and $4,111 for used.

Edmund’s study forecasts that monthly payments will remain high for the foreseeable future. The Federal Reserve could raise interest rates again before the end of the year, and the ongoing UAW strike could hurt inventory levels with those automakers, raising prices for both new and used vehicles.

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An iSeeCars study published last month found that a lack of new cars built during the pandemic has led to used car prices rising 33 percent compared with 2019. Having fewer new cars on dealer lots will raise prices for everyone.