Last quarter, average monthly payments for both new and used cars remained high. While shoppers paid $30 more per month for new cars, payments for used cars decreased by $2.
New car buyers are spending more each month to finance a smaller amount, as the interest rates have increased and the loan terms have shortened. In Q3 2023, the average financing amount for new cars was $40,149 for 68.4 months, resulting in a monthly payment of $736 with a 7.4 percent APR. In comparison, during the same quarter last year, people were paying $703 per month at 5.7 percent for 70.3 months on $41,347.
| New, Q3 2023 | Used, Q3 2023 | |
| Term | 68.4 | 70.1 |
| Monthly Payment | $736 | $567 |
| Amount Financed | $40,149 | $29,328 |
| APR | 7.5% | 11.2% |
| Down Payment | $6,907 | $4,111 |
Used car monthly payments slightly decreased last quarter to $567 compared to Q2 2023, but they are still higher than the $565 paid in Q3 2022. The average amount financed for used cars also decreased to $29,328, down from $31,367 in Q3 2022 and $29,665 in Q2 2023.
In July, August, and September, a record number of new car buyers opted to pay $1,000 or more per month for their vehicles. The percentage of these consumers increased from 17.1 percent to 17.5 percent in the last quarter.
The rise in interest rates is a major factor contributing to the high monthly car payments. The APR for used cars averaged 11.2 percent over the last three months, a significant increase from the 9.0 percent seen last year. The average APR for new cars has also risen by nearly two percent.
These interest rates were last seen in 2007, with new cars having an average APR of 7.4 percent and used cars at 11.4 percent. Average down payments for both new and used cars have also increased, with new cars requiring an average down payment of $6,907 and used cars requiring $4,111.
Edmund‘s study predicts that monthly payments will remain high in the near future. There is a possibility that the Federal Reserve might raise interest rates again before the year ends, and the ongoing UAW strike could adversely affect inventory levels for those automakers, resulting in higher prices for new and used vehicles.
A study by iSeeCars from last month revealed that the limited production of new cars during the pandemic has caused used car prices to rise by 33 percent compared to prices in 2019. With fewer new cars available at dealerships, prices are expected to increase for everyone.