So folks, turns out we’ve got a bit of irony on our hands. Even though car buyers are now – quite sensibly, I must say – nodding towards smaller auto loans, their monthly payments are doing the high jump over records. Yup, you heard it here.
Let me turn you onto the main culprit here — car loans are starting to cost folks quite the hefty penny. That sneakily creeping-up average interest rate is up to 7.2% for new auto loans, up from 6.1% just a year ago. Used car loans aren’t getting off the hook either, making a leap from 10.4% to 11.9%. And if you’re cursed with a troublesome credit score — well, you’re in for a steep hill to climb in terms of car loan rates.
How Car buyers are hitting back
But people aren’t taking this lying down, oh no. Many are picking up shorter-term car loans to try to keep that total interest paid down. Despite this, new car payments are hitting an average of $738 per month, up from $720, making the idea of walking everywhere suddenly appealing, right?
Can paying with cash be the answer?
There’s a silver lining though. Car buyers are more and more often going for shorter loan terms. I mean, who wouldn’t in today’s high-rate climate? The typical loan amount for a car recently dropped by about $1,143 from last year, sitting at $40,366. We’re also seeing an impressive surge in all-cash deals, now making up over one-fifth of new car purchases just last quarter. Costly auto loan rates – bring it on!
What about Credit Scores?
Now for those among us with less-than-stellar credit scores: I’m afraid it’s not all sunshine and rainbows. Almost 82% of shoppers who managed to secure car loans for new vehicles in the last quarter had credit scores of 660 or above. If you’re straggling behind in that race, don’t expect any charity when it comes to loan rates.
- Super Prime (781-850): The envy of all – 5.64% APR
- Prime (661-780): Riding high – 7.01% APR
- Near Prime (601-660): On the fence – 9.60% APR
- Subprime (501-600): Below par – 12.28% APR
- Deep Subprime (300-500): Yikes – 14.78% APR
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So, folks, that’s all we have on auto loans for now. But remember, just because you’re buying a car doesn’t mean you need to get taken for a ride. Until next time, you savvy saver, you.