SANTA MONICA, CA — April 12, 2018 — Consumers who may be considering freshening up their driveway with a new car this spring may experience sticker shock if they're heading to the dealership for the first time in a few years, according to the car-shopping experts at Edmunds. Thanks to a combination of rising interest rates, longer loan terms and higher average transaction prices, Edmunds experts say on average, a buyer could pay more than $6,500 to purchase a new vehicle than they did five years ago.
During the first quarter of 2018, interest rates on new-vehicle loans grew sharply each month, culminating in an annual percentage rate (APR) average of 5.7 percent in March 2018, compared to 4.4 percent in March of 2013. On top of that, the average amount financed reached $31,020 compared to $26,533 in 2013 and loan terms have stretched to 69.5 months compared to 65.7 months five years ago.
These added costs are amplified for car buyers with subprime credit. According to Edmunds experts, subprime car shoppers could easily face twice the average APR on a new-vehicle loan. For example, a subprime buyer who had to pay 11.4 percent in interest would have finance charges of $11,501 over the life of a 69.5-month loan, an increase of $6,027 over the average interest rate.
"The rise in interest rates impacts car shoppers across all credit tiers," said Matt Jones, senior consumer advice editor at Edmunds. "Consumers will need to adjust their expectations on what they can now afford because they may not qualify for the same interest loan rates they did five years ago."
To help buyers safeguard their wallets against higher interest rates, Edmunds editors created an insider guide for car shoppers in the market for a new set of wheels.
If you have good credit:
If you have poor credit:
Edmunds experts note that shoppers thinking about buying a new car should not feel pressured to move up their purchase timing to avoid further increases in interest rates.
"While interest rates are rising, this doesn't necessarily mean that you have to buy a car right now," said Jones. "The best time to buy a car is when you need one and only after you have completed your research."
Edmunds is the leading car information and shopping platform, helping millions of visitors each month find their perfect car. With products such as Edmunds Your Price, Your Lease and Used+, shoppers can buy smarter with instant, upfront prices for cars and trucks currently for sale at more than 13,000 dealer franchises across the U.S. Edmunds' in-house team of unbiased car-shopping experts provide industry-leading vehicle reviews and shopping tips, and the company also has a 20-year-old forums community of car shoppers and enthusiasts, where members can get shopping advice and learn what others are buying and leasing cars for. The company is 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 downtown Detroit, Michigan.