Given most people shop for new cars every five to seven years, you’re going to be in for a bit of a surprise if you’re returning to the market after an absence of half a decade or more.
New car prices are higher than they’ve ever been. Interest rates are higher than they were the last time you shopped too. The good news is rates are nowhere near their historical highs; but what “was” is seldom a factor when you’re spending money now.
With all of that said; what is the average car payment? Well, like so many other things in life, the answer is “it depends.” A number of factors come into play; let’s take a look at them.
Auto sales are currently on track to land just north of 17 million units by the end of 2019, which has been the case for the last four years in a row. As students of economics will tell you, consistently high demand and higher prices go hand-in-hand.
As a result, the average new car transaction price was $37,149 in January of 2019—according to analysts at Kelley Blue Book. It’s important to note that’s just the average price, however. Some 20 percent of borrowers are taking on loans of $50,000 or more.
Longer Loan Terms
These higher prices are predicating lengthier financing agreements. There was a time with the standard new car loan was 36 months. However, as car prices escalated, so did the length of the financing agreements required to make monthly payments affordable. As of January 2019, loan terms are averaging just under 70 months, with some dealers reporting seven-year deals becoming more and more common.
Higher Credit Scores
As of March 2019, the median consumer credit score in the United States fell between 660 and 720, with a mean of 704—according to Fair Isaac Corporation, the nation’s leading credit scoring company.
This matters, because, the higher your credit score, the lower the interest rate you’ll be required to shoulder to finance your new car. Meanwhile, if you’re seeking a car loan with bad credit you will be looking at considerably higher interest rates.
This, in turn, will lead to a higher car payment (all other factors being equal).
Borrowers falling in the 704 range can expect to see Annual Percentage Rates (APRs) averaging 5.87 percent on a 60-month loan. Applicants with scores below 660 but above 620 can anticipate APRs around 11.3 percent. Meanwhile, those in the top tier (720 and above) will command rates in the 4.5 percent range. New car buyers with scores below 589 should anticipate rates approaching 17.2 percent.
The Average Car Payment
With all of that said, the average new car payment in the United States during the first quarter of 2019 was $545.00. Total outstanding car loan debt by Americans was an amazing $1.178 trillion (yes, with a T). This represented a more than 60 percent increase over the same period in 2010.
The typical loan amount varied according to credit score. Borrowers in the 704-range averaged $32,630, which was the highest amount of all scoring groups. However, the average loan amount came in at just under $31,000.
So, with all of that said, new car transaction prices are higher than ever, which by extension leads the average car payment to be as well. The good news is interest rates are pretty low, which does keep borrowing costs down—particularly for those with the most favorable credit scores.
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