Car Loan Rates Are Soaring: Edmunds Experts Share Money-Saving Car Buying Tips Ahead of Black Friday Weekend – PR Newswire | CarTailz

SANTA MONICA, California., November 18, 2022 /PRNewswire/ — New and used car prices could cool slightly ahead of the holiday season, but Edmunds auto-shopping experts warn that rising interest rates should prompt consumers to reconsider their shopping habits before rushing into a car loan . According to Edmund’s data:

  • Average transaction prices for new and used cars are falling but still elevated year-on-year. The average transaction price (ATP) for a new vehicle went down $46,991 in October 2022 compared to a peak of $47,222 in June 2022still represents an increase of 3.1% compared to the previous year October 2021. The ATP for a used car fell $30,045 in October 2022 compared to a peak of $31,095 in April 2022still represents an increase of 4.7% compared to the previous year October 2021.
  • Interest rates on new and used cars are skyrocketing. The average annual percentage rate of charge (APR) for a financed new car purchase climbed to 6.3% in 2017 October 2022 compared to 4.2% in October 2021and is the highest new vehicle APR since April 2019. The average APR for a used car purchase rose to 9.6% in 2017 October 2022 compared to 7.4% in October 2021this is the highest since February 2010.
  • More and more car buyers are opting for longer car loan terms to make monthly payments more palatable. Edmunds data shows that 34% of financed new vehicle purchases had an average loan term of over 73 months October 2022compared to 27% in October 2017.

“Car buyers may walk into Black Friday weekend aware that increased prices and limited inventory are making it harder to do business, but they may not fully understand the importance of preparing for their purchase and how to make it.” financing beforehand will go to the dealer,” he says Jessica Caldwell, Edmunds Executive Director of Insights. “The last time interest rates were this high, at least consumers could count on lower vehicle prices and greater inventory choice to cushion the blow. That’s just not the case in this market.”

To help car buyers ahead of the holidays, Edmunds experts have compiled a list of insider tips to help consumers avoid major pitfalls and maximize savings:

  • Start your purchasing process by getting financing pre-approved. Be sure to get approval from more than one lender to see what you qualify for. With a pre-approved loan offer, you can quickly decide if the financing rate the dealership is offering you is the better deal.
  • Find great APR deals in your area. More and more automakers are offering to subsidize car loans with lower interest rates — the caveat being that most of these offerings require consumers to agree to shorter loan terms of 36 or 48 months. Use your pre-approved offer to compare prices and determine what makes the most sense for you.
  • Think beyond your monthly payment. It’s easy to have tunnel vision when it comes to monthly payments, but appropriate budgeting and flexibility in loan terms means you can take advantage of effective APR offers — meaning you’ll pay less interest over the life of your loan have to. Edmunds analysts calculated how much additional interest a consumer could expect for a $40,000 Car loan for 72 months at 6.9% APR versus 48 months at 1.9% APR. They find that moving from the longer, higher-interest loan to the shorter, lower-interest loan would drive up the monthly payment $680 to $866 but would save a consumer $7,392 of interest paid. Below is a table compiled by Edmunds analysts that illustrates these different scenarios.
  • Consider investing more money. If you have extra cash on hand, it may be worth depositing a larger sum to reduce your monthly payments.
  • Consider the interest saved as an opportunity to upgrade to a nicer vehicle. If you get your interest rate right, you could buy a more expensive vehicle with a cheap APR, but pay less over the life of the loan. The Edmunds analysts calculated that taking out a 1.9% loan for 48 months on a $45,000 The purchase would cost a consumer in total $46,767which only contains $1,767 in interest. Compare that to funding a $40,000 Purchase at 6.9% for 72 months, resulting in a total cost of $48,963 because $8,963 in interest.

“Financing a car purchase is difficult in today’s market, but if you play your cards right, financing is $45,000 could cost you less than financing over time $40,000 over a longer period of time,” said Ivan Druri, Edmunds’ Director of Insights. “With many automakers that offer highly targeted incentive programs, you might find that promotional offers allow you to save so much in overall interest that it might be worth switching makes or models.”

Crowd
financed

expression

APR

Monthly
payment

overall interest
Paid

total amount
financed and
interest paid

$40,000

72

0.0%

$556

$0

$40,000

$40,000

72

1.0%

$573

$1,229

$41,229

$40,000

72

2.0%

$590

$2,481

$42,481

$40,000

72

3.0%

$608

$3,758

$43,758

$40,000

72

4.0%

$626

$5,058

$45,058

$40,000

72

5.0%

$644

$6,382

$46,382

$40,000

72

6.0%

$663

$7,730

$47,730

$40,000

72

7.0%

$682

$9,101

$49,101

$40,000

72

8.0%

$701

$10,496

$50,496

$40,000

72

9.0%

$721

$11,914

$51,914

$40,000

72

10.0%

$741

$13,354

$53,354

Crowd
financed

expression

APR

Monthly
payment

overall interest
Paid

total amount
financed and
interest paid

$40,000

72

6.9%

$680

$8,963

$48,963

$45,000

48

1.9%

$974

$1,767

$46,767

Edmunds guides car buyers online from research to purchase. With in-depth reviews of each new vehicle, shopping tips from an in-house team of experts, and a wealth of consumer and automotive market insights, Edmunds helps millions of buyers choose, price and buy a car with confidence each month. Recognized as one of America’s Best Places to Work by Fortune, Great Place to Work and Built In, Edmunds is located in Santa Monica, California. follow us on Twitter, Facebook and Instagram.

CONTACT:
Talia James Armand
Director, PR & Communications
[email protected]
310-309-4900
http://edmunds.com/about/press

SOURCE Edmunds

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