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- Monthly new car payments hit new peak in Q4, lower interest rates offer some relief
Monthly new car payments hit new peak in Q4, lower interest rates offer some relief
18.9% of new car buyers committed to monthly payments of $1,000 or more. (2 min. read)
Colin Velez
January 06, 2025
Consumers continued to face affordability challenges in the auto market throughout Q4, with the number of new car buyers agreeing to pay $1,000+ per month hitting a new record.
Driving the news: According to Edmunds, financing trends shifted over the course of the holidays. While some factors have improved, consumers are still paying more for vehicles than they’re used to, suppressing demand.
Among new car buyers, 18.9% committed to monthly payments of $1,000 or more, representing the highest share on record.
Zero percent financing deals remain exceedingly rare, accounting for just 2.4% of new car purchases in Q4, a decline of 0.6% from the previous quarter.
Meanwhile, the average amount financed for new vehicles rose $1,400 (3.4%), jumping from $40,713 in Q3 to $42,113 in Q4.
Zooming in: While monthly payments are on the rise, today’s strict financing criteria means that the overwhelming majority of new car customers are prime buyers. The high point of entry into the market could provide a safeguard against a rise in delinquencies, which tend to rise more in the subprime cohort.
Zooming out: Interest rates are still very high, but the industry is finally seeing a light at the end of the tunnel.
The average annual percentage rate (APR) for new-car loans dipped to 6.8% in Q4 from 7.1% in Q3.
Among long-term loans (67+ months), APRs also fell to 7.8% in Q4 from 8.3% in Q3. This breaks the streak of 8%+ rates since mid-2023.
Looking ahead: In addition to lower rates, consumers are also seeing relief through falling used car payments and increasingly affordable EV leases. This means that while new vehicle buyers are stretching their budgets to make ends meet, those able to adapt and widen their search are finding better deals. This places a bigger focus on older, non-ICE inventory as the industry kicks off the new year.
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