The average payment for the purchase of a new car is on the rise – it is expected to reach $45,844, an all-time high, CNBC wrote on Tuesday (July 5).
This results from issues such as limited inventory, a shortage of computer chips, and other supply chain issues.
Data from the US Bureau of Labor Statistics indicates that new car prices jumped 12.6% from a year ago. And used cars are 16.1% higher.
In addition, financing vehicles will also become more expensive – the Fed’s latest interest rate hike of 0.75 percentage points also made auto loans more expensive.
The report notes that the average annual percentage rate on a new car was now 5% for the first time since the start of 2020. The jump from 4% previously may not seem like a lot, although CNBC notes that it could cost consumers $1,324 more in interest on a $40,000 auto loan for 72 months.
“Low interest rates were one of the few reprieves for car buyers amid high prices and supply shortages,” said Jessica Caldwell, chief information officer at Edmunds. “But the Fed’s rate hikes this year are making financial incentives much more costly for automakers, and consumers are starting to feel the pinch.”
That said, luxury buyers haven’t slowed down on car buying. While lower-income consumers may have to step back, more than 12% of consumers who financed a car in June committed to paying $1,000 or more in monthly installments.
PYMNTS wrote recently that debt of all kinds will become more expensive due to interest rate hikes by the Fed, an effort to combat rising inflation.
See also: Auto lenders brace for higher interest rates and recession
Auto loans will also feel a pinch as big banks report their profits – so their auto lending operations will be laid bare.
For example, JPMorgan Chase said its auto loans and leases were $8.4 billion in the first quarter, down from $11.2 billion a year ago.
And CarMax said its net lending over that period has grown from $2.48 billion to $2.44 billion now.