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Monthly costs to finance new and used cars hit a record high


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For consumers looking for an affordable new car, there is little relief on the horizon.

Monthly costs to finance a car purchase have hit a record high. Consumers face an average monthly payment of $656 for a new car, financed at 5.1% over 70.5 months (nearly six years), according to May data from Edmunds.com. For used cars, the average monthly payment is $546, with an average rate of 8.2% and a loan term of 70.8 months (again, just under six years) .

It is likely to be even more expensive. With the Federal Reserve boost base interest rate to 0.75 percentage points on Wednesday, borrowing costs willing to invest more in a variety of consumer loans – including those for cars. With both new and used car prices rising and limited inventories due to supply chain challenges, the market is not expected to improve anytime soon.

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Shortage, interest rates are pushing prices up

New car prices are up 12.6% from a year ago and used car prices are up 16.1%, according to the latest data from the US Bureau of Labor Statistics.

While those year-to-date gains have slowed somewhat, higher interest rates are pushing up the cost of financing a car. The Fed indicated on Wednesday that another rally is likely at its July meeting.

For new cars, the average transaction price is estimated at $44,832 in May, according to JD Power/LMC Automotive forecasts. For used cars, consumers paid an average of $31,450, according to CoPilot, a car shopping app.

One affordability index published by Cox Automotive and Moody’s Analytics shows that the number of weeks of average income needed to buy a new car rose to 41.3 weeks in May from 40.8 weeks in April – and up from about 35 week a year earlier.

3 ways to save money when buying a new or used car

Although current market conditions are not favorable for car buyers, there are ways to try to reduce the cost of a new or used car. Here are some tips from Edmunds:

  • Know your trade-off value. Extra equity from a sale is your biggest negotiating tool in today’s market.
  • Know your pre-approved interest rate (ie from a credit union or bank). Even if you have good credit, you should get pre-approved for a loan and know the interest rate you’re eligible for – which helps determine how many cars you can actually afford – and then See if an agent matches or beats your interest rate. can be obtained elsewhere.
  • Know your overall budget. With rising prices and interest rates, you may not be able to afford the car you think you are. Consider costs beyond monthly payments, including depreciation, taxes, fees, fuel, maintenance, and repairs.



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