Edmunds: Average amount financed for used vehicles jumps by more than $4,400

After looking at the new data, it’s probably understandable why Edmunds senior manager of insights Ivan Drury said, “buying a car in 2022 is a whole different ball game.”

Edmunds reported the average amount financed for used vehicles delivered in the second quarter jumped by more than $4,400 year-over-year to $31,448.

And on the new-car side, analysts spotted a trend never noticed previously in the Edmunds database.

Edmunds determined 12.7% of consumers who financed a new-vehicle purchase in June committed to a monthly payment of $1,000 or more — the highest level that Edmunds has on record — compared to 7.3% in June 2021, 4.6% in June 2019 and 2.1% in June 2010.

Other notable trends from the new data from Edmunds shared via a news release this week included:

• The average annual percentage rate (APR) on new financed vehicles in Q2 2022 climbed to 5% for the first time since Q1 2020.

• The average amount financed for new vehicles hit a near-record level in the second quarter of 2022, climbing to $40,602 — compared to $39,726 in Q1 2022 and $36,215 in Q2 2021. Edmunds analysts note that the first and only other time that the average amount financed for new vehicles surpassed $40,000 was Q4 2021, when the average APR was just 4.1%. 

• An influx of luxury shoppers are turning their backs on leasing and choosing to purchase their new vehicles. Edmunds data reveals that new-vehicle lease penetration fell to 18.5% in June 2022, down from 30.5% in June 2019.

“Low interest rates used to be one of few reprieves for car shoppers amid elevated prices and supply shortages. But the Fed rate hikes this year are making finance incentives far costlier for automakers, and consumers are starting to feel the pinch,” Edmunds’ executive director of insights Jessica Caldwell said in the news release.

“Although there appears to be a steady stream of affluent consumers willing to commit to car payments that look more like mortgage payments, for most consumers the new car market is growing increasingly out of reach,” Caldwell continued.

To help guide car shoppers, Edmunds analysts calculated how much additional interest consumers can expect to pay over the course of a $40,000, 72-month installment contract.

They note that jumping to a 5% APR from a 4% APR would cost consumers $1,324 more in interest over the course of the contract. Jumping to a 6% APR from a 4% APR would cost $2,672 more.

 “A single percentage point increase might not seem like much at first blush, but that adds up to hundreds, if not thousands, of dollars over the course of a 72-month (or longer) loan — a significant cost considering consumers are financing as much as ever,” Drury said in that news release.

“Seeking out finance incentives was less necessary during recent years in which finance rates had been low, but shopping around for lower APR offers from dealers or third parties could make a difference in today’s market,” he continued.

Edmunds analysts also noted that consumers are opting for contracts with longer terms to make monthly payments more palatable. Edmunds data reveals that 36.1% of consumers who financed a new-vehicle purchase in June opted for a loan term of between 73 and 84 months, compared to 32.8% in June of last year.

“Consumers are exploring every possible avenue to make their next vehicle purchase affordable, and longer loan terms are a good example of that, even if that choice poses risks considering vehicle wear and tear and greater negative equity (the amount by which their loan balance exceeds their vehicles’ value) as their vehicle ages,” Drury said.

“The best moves shoppers can make are staying as informed as possible and not relying on car financing strategies of old — because buying a car in 2022 is a whole different ball game,” he went on to say.

Quarterly New-Car Finance Data

(Averages)

Quarterly Used-Car Finance Data

(Averages)

Source: Edmunds