Car payments hit the gas; drivers paying an average of $730 a month

Posted at 12:24 PM, Apr 13, 2023

SOUTHFIELD, Mich. (WXYZ) — The price of buying and financing a new car continues to climb.

New data published by car shopping expert Edmunds shows that the average annual percentage rates on newly financed vehicles rose from 4.4% to 7% in the past year. The highest it's been since 2008.

Lauren Strickland told 7 Action News she purchased a car that wasn't her favorite during the pandemic when options were slim. Now that there's more inventory, she returned to Glassman Automotive Group in Southfield for something that she loves.

"When we used to think about even purchasing a vehicle, I mean you could have had a $300 a month car payment for a purchase and that’s just not happening anymore," said Strickland.

After shopping around, this week Strickland landed on buying a Mitsubishi Outlander for about $100 more a month than her previous car payment.

About the pay jump, she said, "It’s not too bad, but it’s still pretty tough."

George Glassman, president of Glassman Automotive Group said when many people are looking at buying new cars now, "In many instances that same car payment is up in excess of $100 a month. In some cases $150 a month. The new normal is a higher rate and a higher payment than they were paying two and three years ago."

According to Edmunds, in 2022 the average car payment was $656, now it's $730. The percentage of customers who pay $1,000 or more per month for a new car loan has jumped from 4.2% four years ago to 16.8% today.

Glassman commented, "We’re seeing that. Again, that’s a number that I have trouble putting my arms around."

And it's not just cars. The U.S. Bureau of Labor Statistics reports that over the last 12 months, the consumer price index for all items increased by 5%. For new vehicles, it rose 6.1%.

"What’s happening is people are adjusting their expectations, they’re putting more money down," said Glassman.

To keep monthly payments low some buyers have been opting for longer loan terms. However, Glassman said he wouldn't recommend it because of the risks that come with it. Instead, if you need a new car this spring, shop around and be flexible knowing the new normal.

"In some cases, they have to look at alternatives and that may be leasing instead of buying. It may be buying used cars," said Glassman.

"You sort of get it out of your head how things used to be because it doesn’t work like that anymore," Strickland said.