Auto Loan Interest Rates Hit Nine-Year Record High, According to Edmunds
Zero-percent financing deals become scarce for car shoppers as automakers shift to new incentive structures

SANTA MONICA, CA — June 01, 2018 — Auto loan interest rates are expected to hit record highs not seen since 2009 in May, according to the car shopping experts at Edmunds. The annual percentage rate (APR) on new financed vehicles averaged 5.75 percent in May, compared to 5.04 percent in May 2017 and 4.17 percent in May 2013.

While it may seem counterintuitive, Edmunds analysts say this spike in auto loan interest rates is having a positive influence on the automotive market — at least for now.

"Higher interest rates appear to be incentivizing car shoppers, which is likely why we've seen stronger than expected sales so far this year," said Jeremy Acevedo, Edmunds' manager of industry analysis. "Since interest rates have been creeping up all year, shoppers are likely thinking it's better to buy now before rates get any higher. However, this is likely a temporary pull-ahead effect, and could come back to bite automakers later in the year."

Edmunds experts point to a significant reduction in zero-percent loans as a contributor to the rise in average APRs. In May, zero-percent financing deals reached their lowest levels in seven years, constituting 6.3 percent of total finance deals, compared to 9.9 percent in May 2017 and 9.8 percent in May 2013.

"Zero-percent financing loans are growing too costly for automakers to offer, but that doesn't meant that incentives are not out there," said Acevedo. "Automakers and dealers are simply turning toward other, more creative incentive structures in order to lure in consumers."

More insight into recent auto industry trends can be found in the Edmunds Industry Center at http://www.edmunds.com/industry-center/.

New-Car Finance Data
May 2018 May 2017 May 2013
Term 69.0 69.1 65.6
Monthly Payment $535 $510 $465
Amount Financed $31,141 $30,314 $26,909
APR 5.75 5.04 4.17
Down Payment $3,926 $3,801 $3,407

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Used-Car Finance Data
May 2018 May 2017 May 2013
Term 67.0 67.0 64.3
Monthly Payment $399 $385 $367
Amount Financed $21,689 $21,310 $19,470
APR 8.22 7.63 7.86
Down Payment $2,627 $2,529 $2,237

 

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 and Great Place to Work, Edmunds is based in Santa Monica, California, and has a satellite office in Detroit, Michigan. Follow us on Twitter, Facebook and Instagram.

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