There are early signs that new and used car prices in the United States are finally starting to settle down after a long period of crazy increases and fluctuations. We will have to wait until later in 2023 to see what’s the extent of this effect but we know for sure 2022 ended with record-high monthly car payments, according to a new survey from Edmunds.
During the final quarter of last year, the country’s average monthly car payment was $717, which was a record level and an increase of $14 compared to the third quarter of 2022. In Q4 of 2021, the average monthly car payment was $659. Interestingly, there was a minor decline in the average amount financed compared between Q3 and Q4 of 2022 – $41,347 versus $40,833. This can be easily explained by the higher annual percentage rating, which climbed from 5.7 percent to 6.5 percent. For comparison, the APR in Q4 of 2021 was 4.1 percent.
Other interesting findings included in Edmunds’ survey are that there’s now a greater share of consumers committed to paying monthly payments of $1,000 or above – 15.7 percent, to be more precise, compared to 10.5 percent in Q4 of 2021 and just 6.7 percent in the last quarter of 2020. There’s a similar trend in the used car market where now 5.4 percent of consumers went for a $1,000 monthly payment in the fourth quarter of 2022 versus just 1.5 percent in 2020.
As monthly payments go up, so do the down payments. On average, Edmunds says, consumers paid $6,780 as a down payment for a new car in the final quarter of last year compared to $5,291 in Q4 last year. The down payments on the used car market reached an average of $3,291 versus $3,552 a year ago.
The growing annual percentage rating, in turn, leads to fewer consumers going for leasing instead of direct purchase. Edmunds’ data shows that the new-vehicle lease penetration dropped to just 16 percent in 14 of 2022 versus 29 percent three years ago. In the luxury segment, that percentage dropped from 53 percent in 2019 to 26 percent last year.
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