High Interest Rates Put Pressure on Auto Sales in September, According to Edmunds
As auto loan interest rates hit sustained highs not seen in nearly a decade, financing a new vehicle is becoming more challenging for car shoppers

SANTA MONICA, CA — October 2, 2018 — High interest rates continued to put pressure on new vehicle sales in September, according to the car shopping experts at Edmunds. The annual percentage rate (APR) on new financed vehicles averaged 5.8 percent in September, compared to an average APR of 4.8 percent in September 2017 and 4.1 percent five years ago. Interest rates have stayed above 5 percent for eight months in a row, mirroring APRs that the industry witnessed prior to the recession.

Edmunds analysts point to an increase in the average down payment for new vehicles, a steep drop in zero percent finance loans, and a contraction of loan terms as signs of tightening credit conditions for car shoppers. In September:

  • The average down payment for a new vehicle soared to $4,198, compared to $3,817 in September 2017 and $3,555 five years ago.
  • The availability of zero percent finance loans dropped to 5.6 percent compared to 10.1 percent in September 2017, hitting the lowest September level since 2005.
  • Average loan terms contracted to their lowest levels all year, dropping to 68.7 months in September, compared to 69.4 months in September 2017 and 65.5 months five years ago.

"The trickle-down effect of elevated interest rates really started hitting car shoppers in September," said Jeremy Acevedo, Edmunds' manager of industry analysis. "While new vehicle prices continue to rise, favorable credit offerings are growing increasingly more difficult to come by. Buying conditions are far less amenable for consumers than they were before, which might come as a shock for shoppers coming back to the market for the first time in a few years."

Edmunds experts note that the Fed rate hike that went into effect toward the end of September are a harbinger of worsening market conditions heading into the fourth quarter.

"The higher Fed effective rate means we can expect to see interest rates continue to inch up as we head into the rest of the year," said Acevedo. "While strong economic factors like low unemployment rates and high consumer confidence have helped sustain healthy sales levels so far amid less favorable conditions, cheap and easy credit is really what shoppers zero in on when purchasing a new vehicle. As credit offerings grow more rigid for consumers, automakers are facing increased pressure on new vehicle sales through the end of the year."

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

New-Car Finance Data
September 2018 September 2017 September 2013
Term 68.70 69.36 65.51
Monthly Payment $537 $511 $467
Amount Financed $31,062 $30,736 $27,081
APR 5.80 4.83 4.07
Down Payment $4,198 $3,817 $3,555


Used-Car Finance Data
September 2018 September 2017 September 2013
Term 66.95 66.81 64.28
Monthly Payment $401 $386 $366
Amount Financed $21,697 $21,380 $19,470
APR 8.38 7.52 7.81
Down Payment $2,657 $2,494 $2,161

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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