APR for new models drops to lowest level in 21 months as used metric stays steady

At least from an interest-rate perspective, new vehicles looked a bit more attractive to buyers in November, even though retail prices for those models continued to climb.

Meanwhile, financing for used vehicles stayed on a steady course, according to the November information compiled by Edmunds.

Edmunds reported this week that the average interest rate for new-vehicle financing in November dropped to its lowest level of 2019 — and lowest level seen since February 2018. The annual percentage rate (APR) on new financed vehicles averaged 5.5% in November, compared to 5.7% in October and 6% in November of last year.

Edmunds data showed that 21.8% of shoppers who financed their vehicle purchases in November got an interest rate below 3%, compared to 18.6% of those who financed purchases in November.

On the used-vehicle side, the average APR came in at 8.3% in November, nearly flat compared to the previous month and year.

Edmunds executive director of insights Jessica Caldwell explained how the opening to the holiday shopping season impacted the November data.

“Shoppers who made it out to the dealership this November got to take advantage of some of the biggest bargains all year thanks to a combination of Black Friday and model-year sell-down promotions,” Caldwell said in a news release.

“Auto loan interest rates still aren’t as low as they were a few years ago, but it’s encouraging to see that shoppers are landing more attractive financing offers as rates continue to trend downward,” she continued.

While interest rates declined, Edmunds noted that new vehicle prices continued to rise in November. Edmunds data indicated that the average transaction price for a new vehicle climbed to an all-time high of $37,981 in November, compared to $37,188 last year and $33,282 five years ago.

“We typically see a lift in large truck and luxury vehicle purchases at this time of year, but these rising vehicle prices are also a reflection of car shoppers opting for bigger vehicles with more options across the board,” Caldwell said.

The valuation analysts at Kelley Blue Book reported similar rises in new-vehicle prices.

KBB analysts estimated average transaction price for a light vehicle in the United States was $38,393 in November. New-vehicle prices increased $387 or 1% from November of last year, while climbing $106 or 0.3% compared to the previous month.  

“Transaction prices rose only 1% as dealer discounts grew to move older inventory,” Kelley Blue Book analyst Tim Fleming said in a news release.

“As retail sales slowed by more than 2% this year, vehicles are spending more time on dealer lots, about 80 days on average, which is five days longer than a year ago and the highest level seen since 2017,” Fleming continued. As a result, there are more discounts and incentives, especially now that the year’s end is approaching.”

Other experts from the Cox Automotive family of companies also shared their assessment of November sales and financing activities. The rundown of recaps began with Charlie Chesbrough, who is senior economist at Cox Automotive.

“The U.S. consumer, motivated in part by low unemployment rates, continues to drive the economy forward,” Chesbrough said. “Vehicle shoppers in November were met with good discounts on older inventory and responded accordingly. November’s results will likely keep the industry on pace to sell 17 million units in 2019, slightly above our full-year forecast of 16.8 million.

“The bottom line here: Strong labor and equity markets continue to provide the foundation for robust vehicle demand. Until either of those changes substantially, strong vehicle markets are likely to continue,” Chesbrough added.

Autotrader executive editor Brian Moody touched on the kinds of vehicles people are buying nowadays, refuting a perception that individuals are only going for SUVs and pickups.

“While the Detroit automakers may believe cars are bad business, the Japanese and Korean automakers view the market differently,” Moody said. “They are investing in good sedans; consumers, turned away by the Detroit Three, are finding what they want from the Asian brands.

“Nissan and Toyota actually delivered increases in year-over-year car sales. Honda and Hyundai saw only small declines in car sales last month. Don’t believe the mainstream media talking point — cars are not dead in America,” Moody went on to say.

And finally, Brad Korner, who is general manager of Cox Automotive Rates and Incentives, returned back to topics also noted by Caldwell over at Edmunds.

“With older inventory plentiful and aggressive incentives in place, there were many good deals in the auto market last month. By our count, incentive program volume in November was at its highest point since July. In all, 2019 is on course to set a record for program volume. In other words, there has never been more incentives in play,” Korner said.

“Interestingly, counter to trend, Nissan and Infiniti have been dialing back this year and showing a downturn in sales,” he continued. “The number of unique programs offered last month was well below November 2018, resulting in less money for discounts to manipulate pricing and payments. Clearly, Nissan is working to rein in the number of deals they have in the market.”

New-Car Finance Data

Used-Car Finance Data

Source: Edmunds