APR on new & used financing stays nearly steady in October

As experts from ALG and Kelley Blue Book watched average transaction prices (ATP) for new models climb again in October, Edmunds noticed average interest rates for new-vehicle financing remained below 6% for the fourth month in a row.

Edmunds pegged the average APR on new financed vehicles at 5.7% in October; the same reading as September and down from 6.2% in October of last year.

Meanwhile, the average APR for used-vehicle financing edged slightly lower in October, according to Edmunds, ticking down to 8.4% from 8.7% year earlier.

Edmunds experts say new-vehicle shoppers found much better financing offers this year compared to last October, when interest rates spiked above 6% and stayed there through the first six months of 2019.

“Car shoppers got to take advantage of some decent financing offers as automakers continued their model-year sell-down efforts in October,” said Jessica Caldwell, Edmunds’ executive director of industry analysis.

“Auto loan interest rates still aren’t as low as they were a few years ago, but it’s good news for shoppers that rates appear to be reaching a point of relative stability,” Caldwell continued in a news release.

Edmunds experts noted that the Fed rate cut at the end of the month happened too late to do much for October sales, but could help ease financing conditions for vehicle shoppers through the rest of 2019.

“The end of the calendar year is a popular time for expensive vehicle purchases,” Caldwell said. “Shoppers in the market for a large truck or SUV, or a new luxury vehicle, can look forward to taking advantage of lower financing rates as a bit of an early holiday gift.”

The valuation analysts at Kelley Blue Book reported the estimated average transaction price for a light vehicle in the United States came in at $38,259 in October. KBB calculated new-vehicle prices increased $1,064 (up 2.9%) from October of last year, while decreasing $141 (down 0.4%) from last month.  

“Average transaction prices were generally favorable for most automakers, as the industry average climbed 3% year-over-year, partially due to the shifting sales mix from cars to trucks and SUVs,” Kelley Blue Book analyst Tim Fleming said in a news release.

“However, car prices did grow by 2% in October 2019, their biggest improvement in nearly a year,” Fleming continued.

KBB added Manufacturers are focusing incentive programs on the increasingly competitive utility segments, helping make those vehicles more affordable to consumers. Analysts said trucks have shown the most strength of any segment with full-size trucks up 3%, while mid-size trucks rose 6%, aided by new and redesigned models. 

And over at ALG, a subsidiary of TrueCar, analysts there projected average transaction prices to be up 2.6% from a year ago and 0.2% from September to reach $35,239.

“With the economy remaining resilient, consumers have not been afraid to opt into premium trims and luxury models leading to higher average transaction prices,” ALG chief economist Oliver Strauss said in a news release. “With incentives up year-over-year, consumers are getting some help to offset the higher transaction prices.”

ALG shared four other additional insights in its latest update, including:

• Honda and Nissan are the only automakers expected to be down on ATP year over year, 2.9% and 1.1%, respectively. Meanwhile BMW is expected to be up 7.1%.

• ALG projects that U.S. revenue from new vehicle sales will reach $47 billion for the month of October 2019, up 1.5% or $717 million from a year ago and 5.5% from last month.

• The ratio of incentive spend to ATP is expected to be 10.7%, up 2% from a year ago but down 5.4% from September 2019.

• In ALG’s Retail Health Index (RHI), which measures automaker brand health, Hyundai and Kia stood out for mainstream brands and BMW and Mercedes stood out for luxury brands due to a mix of strong retail sales and lower incentive spend utilized to drive retail volume.

“The broader shift in consumer preference from cars to SUVs is leading to a notable spike in BMW’s average transaction price, fueled by exciting new or redesigned SUV products in the X5 and X7,” ALG chief industry analyst Eric Lyman said.

“BMW’s strong Retail Health Index performance shows the brand is holding steady with consumers and that they’ve be able to drive volume at higher price points, all while lowering incentives,” he continued.

Added Lyman, “We expect Honda’s drop in average transaction price to be due to an increase in retail share for the Civic, which overtook the Accord as Honda’s best-selling sedan over the last few years and continues to capture share made available by competitors in the segment overall.”

New-Car Finance Data

Used-Car Finance Data

Source: Edmunds