• Wed. Nov 16th, 2022

$650 to over $700 is now the average for monthly car payment

ByElla E. Kidwell

Jun 19, 2022

Spencer PlattGetty Images

  • Depending on who you ask, the average car buyer in the United States pays $657 (Edmunds.com) or $712 (Moody’s) per month for their new vehicles.
  • The driving factors include all the things that have pushed average prices up over the past year – May was the second highest month on record – such as the pandemic and inflation, as well as continued strong demand.
  • Last week, the Federal Reserve raised interest rates by 0.75 percentage points, which could make borrowing money for new cars even more expensive, so now is a good time to be a informed buyer and to ensure that your personal credit rating is good.

    Inflation is everywhere, so it’s no surprise, however disheartening, to see the monthly cost of financing a new car hit record highs, or to hear that experts are predicting this will continue for months. Pinpointing exactly how much people are paying now differs depending on who is doing the counting, with Edmunds.com finding the average payment for a new car in May reached $656, while Moody’s Analytics calculated the amount to be $712.

    Whatever the calculations say, the rise in payments is due to factors that anyone paying the slightest attention to the news should be able to guess: supply chain problems and inflation caused or worsened by the pandemic. These factors have contributed to increasing the average price of a new car more and more, which is of course linked to the high monthly payment. The latest figures available are from May, when the average price of a new car hit $47,148, according to KBB. This is the second highest monthly average on record, just below the $47,077 average we saw last December. According to the US Bureau of Labor Statistics, new car prices are up 12.6% from a year ago, while used car prices are up 16.1%.

    On inflation, the Federal Reserve raised interest rates by 0.75 percentage points last week, a move Washington Post part of the government’s “war on inflation”. The 0.75 point increase was the Fed’s biggest rate hike since 1994, part of what the Fed said was its mission “to achieve maximum employment and inflation at the rate of 2% long term”. According to information from the Bureau of Labor Statistics, the annual inflation rate in May was 8.6%, the highest level since 1981.

    Is there a silver lining?

    According to New York Times, the average interest rate for new car loans was 5.08% in May, while the average rate for used vehicles was 8.46%. Higher interest rates mean it costs more to borrow money, but the good news, if you already have a loan, is that the higher interest rate won’t change your payment. monthly or what you owe.

    Of course, if you buy a car now, your financing offers could be higher than they would have been before last week. Or maybe not, as Yahoo Finance points out, since auto loans are “so dependent on the buyer’s credit score and credit history” that the effects of a higher interest rate won’t will not affect every buyer in the same way.

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