Auto Loan Interest Rates Hit Highest Level Since 2008 and Drive Record Share of $1,000+ Monthly Payments in Q1, According to Edmunds
Analysts say interest rates create biggest roadblock to new vehicle purchases in Q1 despite improving inventory levels

SANTA MONICA, CA — April 3, 2023 — Financing a new vehicle purchase continues to grow increasingly out of reach for many consumers, according to the car shopping experts at Edmunds. New data from Edmunds reveals:

  • The average annual percentage rate (APR) on new financed vehicles in Q1 2023 climbed to 7%, compared to 4.4% in Q1 2022, which is the highest level Edmunds has on record since Q1 2008. However, Edmunds analysts note that March marked the first time after 14 consecutive months of increases that the average new-vehicle APR stayed flat (at 7%), which they attribute to a moderate increase in subsidized financing by automakers.
  • The average monthly payment for new vehicles hit a record high of $730 in Q1 2023, compared to $656 in Q1 2022.
  • 16.8% of consumers who financed a new vehicle in Q1 2023 committed to a monthly payment of $1,000 or more — a new all-time high according to Edmunds — compared to 10.3% in Q1 2022 and 6.2% in Q1 2021.
  • The average down payment for a new vehicle climbed to a record high of $6,956 in Q1 2023, compared to $6,083 in Q1 2022.

"Since inventory levels are improving, interest rates are now topping the list of the greatest obstacles that automakers will be facing in 2023 to move metal," said Jessica Caldwell, Edmunds' executive director of insights. "But with major challenges come great opportunities: Since interest rates are at the forefront of consumers' minds, any automaker or dealer that can advertise incentives related specifically to interest rates will likely get more attention. This could be a powerful marketing tool that would enable sellers to tap into the significant pent-up demand that has been building over the past few years and convert that demand into actual sales."

Edmunds analysts took a closer look at financed new vehicle purchases in Q1 2023 and calculated the average monthly payment, amount financed, APR, down payment and total interest paid — in each case based on loan term lengths. A table containing Edmunds' findings is included below.

Edmunds experts note that these figures highlight the stark contrast between the consumers who are able to take advantage of lower APR offers and those who can't. Although quarterly figures appear to reflect that the average loan term has remained static at around 70 months, Edmunds analysts say term lengths don't tell the full story — which is that more car shoppers are being pushed to the extreme ends of the finance terms spectrum. 12.3% of consumers opted for 36- or 48-month loan terms in Q1, the highest Edmunds has on record since Q4 2009, while a majority of consumers are extending loan terms out as much as possible in order to increase affordability.

Q1 2023 New-Car Finance Data Broken Out by Loan Term Length
Loan Term Range (Months) Monthly Payment Amount Financed APR Down Payment Total Interest Paid on Loan Share of Loans
31-36 $829 $28,795 2.6% $12,161 $1,169 4.7%
43-48 $655 $28,919 4.0% $11,240 $2,423 7.6%
55-60 $722 $37,760 5.5% $10,509 $5,516 17.3%
67-72 $730 $41,937 7.7% $6,005 $10,563 36.8%
73-84 $746 $45,557 8.4% $4,136 $14,285 30.5%

"It takes money to save money in today's market. Although more automakers are offering to subsidize auto loans with lower interest rates, the catch is that most of these offers require that consumers agree to shorter 36- or 48-month loan terms — which might put people off at first glance," said Ivan Drury, Edmunds' director of insights. "If you're a qualified buyer and have the means to put more money down, whether in cash or via your trade-in, know that you have a serious advantage — you'll be committing to a much larger amount toward the down or monthly payment, but you will save up to tens of thousands of dollars over the course of your auto loan."

Quarterly New-Car Finance Data

2023 Q1 2022 Q1 2022 Q4
Term 68.8 69.8 69.7
Monthly Payment $730 $656 $717
Amount Financed $40,468 $39,726 $40,833
APR 7.0% 4.4% 6.5%
Down Payment $6,956 $6,083 $6,780

Quarterly Used-Car Finance Data

2023 Q1 2022 Q1 2022 Q4
Term 70 70.4 70.5
Monthly Payment $551 $542 $563
Amount Financed $28,610 $30,994 $30,217
APR 11.1% 7.8% 10.0%
Down Payment $3,999 $3,604 $3,921

About Edmunds
Edmunds guides car shoppers online from research to purchase. With in-depth reviews of every new vehicle, shopping tips from an in-house team of experts, plus a wealth of consumer and automotive market insights, Edmunds helps millions of shoppers each month select, price and buy a car with confidence. Regarded as one of America's best workplaces by Fortune, Great Place to Work and Built In, Edmunds is based in Santa Monica, California. Follow us on TikTok, Twitter, Facebook and Instagram.

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