Average Monthly Payment for a New Car Hits Record of $636

• The average monthly payment for a new car rose to $636 in Q4 2021, up from $614 in Q3.
• Rise is due in part to luxury buyers shifting from leasing to financing.

If you've been in the market for a new or used car in the past couple years, the high prices caused by the global microchip (and thus car inventory) shortage are a grim reality. Thanks to data collected by Edmunds experts, we can see just how dire the situation is. In a nutshell, monthly payments are up and the amount financed is up — both due in part to luxury shoppers leaning toward financing, rather than leasing. Interest rates, on the other hand, are down slightly, offering shoppers a rare bright spot in the current auto buying climate. Here's what the data tells us.

Average monthly new car payment rises to $636

A little less than a third of shoppers opted to lease their vehicles in the fourth quarter of 2019 — the last pre-COVID quarter. Since automakers are generally less likely to offer attractive lease rates in these times of high demand and limited supply, shoppers are opting to finance rather than lease their new vehicle. Lease penetration dropped to 23% in Q4 2021.

This is affecting luxury shoppers in particular, as the low monthly payments achievable by leasing makes these vehicles more attainable. But a combination of reduced lease incentives and relatively low interest rates (a fall from 4.4% in Q3 2021 to 4.1% in Q4) means that luxury buyers are increasingly comfortable with financing a vehicle purchase. For instance, the percentage of BMW shoppers financing — rather than leasing — their new car increased from 33% in Q4 2020 to 42% in Q4 2021, while Mercedes-Benz financing numbers rose from 29% to 44% over the same time period. Lexus noted the biggest shift, with 26% of shoppers opting for financing in Q4 2020, compared to 45% in Q4 2021.

A greater number of shoppers financing expensive luxury vehicles naturally pushes up the average monthly car payment. This figure stood at $581 in Q4 2020 — a number roughly on par with Q4 2019 (as noted, the last pre-COVID quarter). But the vehicle shortage was in full swing by 2021, pushing monthly payments to $614 in Q3 2021. That rose to $636 in Q4 2021, the highest average monthly payment that Edmunds has ever recorded. These numbers coincide with an average rise in down payment, from $5,394 in Q3 of last year to $5,780 in Q4. Bottom line: Buyers are spending more up front and every month thereafter. Thankfully, the average financing term is holding steady at about 70 months, so at least our data doesn't show that buyers are making these payments work by stretching out the payback period.

Edmunds says

With all else being equal, an increase in the overall average monthly payment might suggest rising prices or interest rates, or a general shift toward more expensive vehicles. However, in this case at least, the shift seems to be driven by luxury shoppers opting to finance rather than lease their new vehicles.