Average Monthly Car Payment Hits Record High of $712

A person walks by a car dealership on June 10, 2022 in New York City. The Labor Department announced on Monday that consumer prices rose 8.6% last month from a year earlier. Inflation has risen to its highest level in four decades, raising the cost of airfare, hotels, vehicles, gas, and food.

The average monthly car payment in May hit an incredible $712, according to Moody’s Analytics, thanks to inflation, inventory shortages and increased demand.

While Moody’s told ABC News that prices could come down soon — prices only rose one percent in May over March — other industry experts say it could be years before supply goes up and prices come down. Interest rates on car loans increased another eight basis points. With the fed announcing the highest interest rate hike in 20 years this week, obtaining a car loan an even costly venture in the future.

Then there’s that old chestnut of supply and demand: familiar supply chain disruptions and occasional plant closures due to COVID-19 spikes have kept dealer inventories on a tight leash. The war in Ukraine hasn’t helped either.

New cars are now 26 percent more expensive than before the pandemic and 19 percent more expensive than just a year ago, according to Moody’s. Automakers and dealers really have no incentive to lower cost while their products are in both high demand and limited supply. They might not ever go back to business as usual. From ABC:

A report from Moody’s Analytics found that typical monthly car payments hit a record high of $712 in May. Kelley Blue Book data found that new vehicle prices averaged $47,148 in May, the second highest on record.

Vehicle affordability worsened again because of higher interest rates and increased car prices, according to a recent Cox Automotive & Moody’s Analytics vehicle affordability index report. The report said “the estimated typical monthly payment increased 1.7% to $712,” which is a new record high for monthly payments.

It would cost 41.3 weeks of median income to buy a new vehicle, which is a jump of 19% from May of 2021, according to the report.

There is a caveat of course: the average price hike is partially being driven by greater demand for luxury vehicles. This past December, the average cost of a luxury vehicle was $64,864. Six months later it’s risen to $65,379, with buyers paying an average of $1,071 above sticker price, according to ABC.

Luxury or no, it seems the shaky economy is catching up with some car buyers who may have bitten off more than they could chew. Ford’s CFO, John Lawler, told a crowd at the Global Auto Industry Conference on Wednesday that the automaker was seeing a rise in loan delinquencies, according to Automotive News:

“We are seeing some headwinds when it comes to delinquencies as maybe a leading indicator.”

Still, he said the uptick was not yet a concern because delinquency rates have been at historic lows for about the past year.

“It seems like we’re reverting back more towards the mean,” Lawler said.

It’s not just new cars spiking in cost. We reported used car prices were up 40 percent over last year in February, averaging between $28,000 and $29,500. If you’re looking to get the best price on a used car even in this economy, our car buying guru Tom McParland has some helpful tips.