Nearly One-Fifth Of New Car Buyers In The U.S. Now Pay Over $1,000 Per Month

So, you thought that with the worst of the pandemic and supply shortages behind us, new car inventory would slowly get back to normal and prices would come down, didn’t you? That’s cute. Normal economic principles no longer apply, so new cars have continued to get more expensive than ever before. That also means buyers are stretching themselves thin to be able to afford them. The Detroit Free Press reports that almost one-fifth of new car buyers are dropping over a grand a month for their payment, while the average monthly payment is way over $700.

There’s No Vehicle More American Than The Humvee

Data from Edmunds shows just how far buyers are willing to go to be able to drive a new car:

The number of car buyers paying $1,000 or more a month to finance a new vehicle is creeping higher, closing in on nearly one-fifth of new-car buyers — an all-time high. The average monthly car payment has topped a whopping $730 recorded in the first quarter to now sit at $733, according to second-quarter vehicle transaction data from Edmunds.

Even worse, it’s a perfect storm for buyers and a pizza party for profit-driven dealers and automakers. Inventories are still tight from a lingering chip/parts shortage, but now there are also problems getting those finished vehicles to dealers; there aren’t enough railcars to do it. And the vehicles that are on dealer lots are often expensive, fully loaded models that have high profit margins for automakers.

Meanwhile, dealers, forever the unnecessary middle man, are tacking on markups and add-ons that seem to be getting higher every time a new model drops. The results of all of this is that buyers are screwing themselves just to get behind the wheel.

According to Edmunds, buyers paying over $1,000 a month for their car are in two groups: borderline financially irresponsible and outright screwed:

In the first, nearly 65% of those consumers signed up for an average loan-term range of 67 months and 84 months. Their average APR was between 8.5% and 9.6%. Edmunds analysts say these are consumers who are paying thousands of dollars toward interest compared with principle. They could find themselves owing more than the car is worth in the future.

In the other group, about 16% of consumers signed up for a loan term length between 31 months and 48 months and a 2% to 4.8% APR.

Everyone else is just as screwed: the average monthly payment topped $733 in the second quarter of 2023. That’s up $55 from the same time in 2022. Average APRs have gone up to 7.1 percent, which is 2.1 percent higher than a year ago, as well as being “the highest APR since the fourth quarter in 2007.” The average amount buyers are financing went down a bit, dropping $246 to $40,356 compared to a year ago.

So what’s the lesson here? Don’t stretch yourself thin just to afford a car. If you can, wait till things improve. If you just have to buy something right now, haggle if you can and shop around for the best interest rates.