Monthly Car Loan Payments Swell, Even as Recession Looms
Rising car prices and spiking interest rates mean vehicle buyers are taking on larger loans to get new sets of wheels, according to recent research.
Nearly 16% of people who financed car purchases last year signed on for monthly payments of $1,000 or more, auto researcher Edmunds says. That is a new record, up from 11% just a year earlier.
Car prices climbed to an average of nearly $46,400 in December, J.D. Power found in a separate study. Price tags have skyrocketed in the last two years thanks to supply chain woes and swirling demand, although there are signs that the market is starting to soften.
Meanwhile, interest rates are climbing.
The average annual percentage rate (APR) on new financed vehicles rose to 6.5% in the fourth quarter of 2022, up from 5.7% in the same three-month stretch a year earlier, Edmunds found. The APR on used financed vehicles reached 10% in the last quarter, compared to 9% the previous year.
“Just as new and used car prices finally started to cool off in Q4, rapidly rising interest rates created an even greater barrier to entry for consumers who rely on financing — which is the vast majority of car shoppers,” Ivan Drury, Edmunds' director of insights, said in a statement announcing the latest figures.
That puts new and used car buyers financing their vehicles in a dangerous spot. They are loading up on monthly payments that they may not be able to afford.
“As we shifted toward an environment with diminished used car values and rising interest rates over the past few months, consumers have become less insulated from those riskier loan decisions, and we are only seeing the tip of the negative equity iceberg,” Drury said.
Car Defects Pose Safety Threats
Cars may be getting more expensive to buy, but there is little sign that they are getting safer to drive.
Major auto manufacturers continue to recall millions of vehicles around the globe every year. They cite a wide range of defects and malfunctions that increase accident risks for drivers, passengers and everyone else on the road.
The recalls are regularly announced long after cars leave factory floors and dealer lots, sold to unsuspecting buyers. Used car dealers continue to sell recalled vehicles across the country, even when they know that a defect has not been fixed.
That is where the California lemon law comes in.
The law requires auto manufacturers to do a wide variety of repairs on cars while they are under warranty. It also forces the companies to buy back cars that they cannot or flat-out refuse to fix. That includes compensating the owner for the vehicle’s purchase price, as well as financing fees, rental car costs and other related expenses.
Speak with a California Lemon Law Attorney
If you have been stuck with a defective or malfunctioning vehicle, a California lemon law attorney at Bickel Sannipoli APC can help you fight back.