Auto Loan Interest Rates Hit Highest Level in a Decade, According to Edmunds
Interest rates on new vehicles are expected to hit their highest level since 2009 in February, according to the car shopping experts at Edmunds. It’s a good to see your credit union before signing up for an auto loan, since credit unions often have the most competitive rates.
The annual percentage rate (APR) on new financed vehicles averaged 6.26 percent in February, compared to 5.19 percent last year and 4.56 percent five years ago.
Edmunds experts attribute this in part to automakers reining in zero percent financing deals and overall low interest rate offers.
“Shopping conditions are pretty unfavorable for consumers across the board, and even those with good credit are having trouble finding compelling finance offers,” said Jeremy Acevedo, Edmunds’ manager of industry analysis. “As rising vehicle costs and interest rates continue to compromise affordability, more shoppers might find themselves priced out of the new vehicle market.”
Although credit conditions continue to tighten, Edmunds experts note that shoppers who do finance new car purchases are refusing to budge on the vehicles that they want.
The average amount financed for a new vehicle hit $32,071 in February compared to $31,313 in 2018 and $24,477 five years ago, which Edmunds analysts note reflects sustained shopper preferences for pricier trucks and SUVs.
“The consumer appetite for SUVs and trucks grew out of a time when it was far more affordable to buy these vehicles, and even now that finance conditions aren’t nearly as friendly, shoppers still refuse to settle for less car,” said Acevedo. “With auto loan delinquency on the rise, it’s more important now than ever for consumers to understand the risks associated with financing more than what you can afford.”
This is good advice, since far too many consumers are opting for very long-term financing to keep monthly payments “affordable”.
Loans that stretch out for seven years may seem appealing when you’re staring at a shiny new vehicle, but they’ll feel less savvy with each passing month. Such financing plans guarantee that your vehicle will depreciate much, much faster than that loan will be paid down.
For all these reasons and more, consult with your credit union before signing any finance contract. Your CU has the best deals on auto loans, and the best advice to offer on what’s best for you financially.
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