Cars are becoming more and more affordable for many Americans due to tight supply of new cars, high prices and rising interest rates.
Average transaction price for new cars exceeded in June $ 48,000 For the first time this week, the Kelley Blue Book reported an almost 13% year-on-year increase.
Also, car interest rates are affected by benchmark rates set by the Federal Reserve, so car payments are skyrocketing as the Fed raises interest rates to combat inflation.Most new car purchases are funded and average monthly New car payment According to a recent industry report, it is currently at around $ 700, a record high.
Jonathan Smoke, Chief Economist at Cox Automotive, the parent company of Kelley Blue Book, said:
what happened? The availability of new cars lags behind demand, largely due to the ongoing shortage of computer chips used in car manufacturing. Other global factors are also putting pressure on production. earthquake In Japan, the shutdown of Covid-19 in China and the war in Ukraine continued. Capacity is unlikely to fully recover in the next year or two, Smoke said. “Supply is still a problem.”
According to the Kelley Blue Book, average car prices are rising as more people are choosing luxury brands.Increasing share of wealthy buyers pays over $ 1,000 a month, according to the car website Edmonds.. But for most consumers, buying a new car is “growing out of reach,” said Jessica Caldwell, executive director of insights at Edmonds.
However, shoppers have choices. If you own a car that is working well, keep driving for a while. “If possible, it’s still a good time to wait,” said Ben Preston, a consumer report car writer.
According to Preston, you can also plan ahead and ask the dealer to place an order directly with the car manufacturer. With so-called factory orders, you can choose the exact spec, for example, rather than settling on a color you don’t like just because it’s the only vehicle in the lot. According to Preston, it will take at least a few months to wait for the car, and you’ll have to pay a “destination” fee for delivery to the dealer, but with minimal dealer markup than the sticker price. Can be suppressed to.
If you need a car right away, Kelly Bluebook says some models, such as compact cars and compact sport utility vehicles, are sold at prices that are about 30% cheaper than the average transaction price.
According to Caldwell of Edmonds, your best bet could be a used car with an average monthly charge of $ 555 in the next three months of this year.
But don’t expect big bargains there either. Used car prices are rising due to tight supply in the new car market.Recently, prices remain higher than they were before the pandemic. Slightly relaxedAccording to the online car search site iSeeCars. According to iSeeCars, at least one small used car, the Kia Rio, remains relatively affordable despite price increases.
Sedan once lost favor and became easier to find, but it’s changing. Tyson Jominy, Vice President of Data and Analysis at JD Power, said:
Midwestern states are generally cheaper than coastal states, so if you want to travel, you may be able to save money, according to Jominie. Alternatively, you can use an automated broker to find the car you need in another condition.
“We really need to look at both,” Caldwell said, as both new and used cars are in limited stock. New cars are more expensive than used cars, but interest rates are usually lower.
If you find your favorite new or used car at an affordable price, “buy it now,” Caldwell says. “Don’t wait.”
One of the madness of the car market, silver backing, is that the value of trade-in is strong. Caldwell said the average trade-in price in June was about $ 24,000, up 12% year-on-year.
Here are some questions and answers about car prices:
How do I get the highest interest rates on my car?
Smoke said maintaining good credit is important to qualifying for the lowest possible interest rates. Some dealers may still offer a zero percent loan on new cars, but he said he usually needs a credit score of 760 or higher to qualify.You can get a free credit report at Annualcreditreport.com..
According to Preston in the Consumer Report, by comparing loan interest rates between lenders and pre-qualifying before shopping for a car, you can see the interest rates you have secured compared to the interest rates offered by dealers.
Is it possible to get a long-term loan and reduce the monthly car bill?
Yes, and many consumers do that, says Edmonds. More than one-third of shoppers who financed a new car in June chose a loan of 73-84 months, or about 6-7 years. However, the longer the loan, the higher the interest rate, so even if the payment is manageable, you will pay more over time. Also, the longer the loan, the higher the risk of being “upside down”. That is, the value of the car is less than the balance of the loan. In other words, if you have to sell your car before the debt is repaid, you can borrow the money.
What if I have a problem paying for my car?
Delinquency rate of consumer debt including Car loanIt remains low, but increased “moderately” in the first quarter of this year, according to the Federal Reserve Bank of New York. Kristen Holt, Chief Executive Officer of GreenPath Financial Wellness, a non-profit credit counseling agency headquartered in Detroit, said: payment. “
If the problem is short-term, you may be able to defer payments while keeping your finances stable. If the car is worth it, you can probably sell it to pay off your debt and buy a more affordable model.Commuting to work for most Americans To work Unless you work from home or live near a city with good public transport, it’s difficult without a car. If your loan interest rate is high, you can try refinancing. Holt said some credit unions offer low interest rate programs.
