Edmunds modifies auto finance data collection, as Q3 metrics keep rising

Edmunds said its analysts have adjusted their auto finance data cleaning process to include new and used monthly payments up to $2,000 to account for changes to the market, as previously the limit was up to $1,500.

Based on the third quarter data Edmunds shared on Monday, you can understand why.

Edmunds reported 14.3% of consumers who financed a new-vehicle purchase in Q3 committed to a monthly payment of $1,000 or more. That’s the highest level that Edmunds has on record.

Edmunds said 12.2% of new-vehicle buyers in Q2 of this year and 8.3% of new-model purchasers in Q3 2021 signed an installment contract requiring that high of a monthly payment.

On the used-vehicle side, Edmunds didn’t mention any data about individuals taking on a monthly payment that higher. However, analysts did report that the average monthly payment for used vehicles financed during Q3 came in at $565, which was $10 higher than the previous quarter.

While the average amount financed for used vehicles delivered in Q3 was $31,366 — which actually was $82 less than a quarter earlier — Edmunds indicated the average amount financed for new vehicles hit an all-time record high in Q3, climbing to $41,347. That’s up from $40,602 in Q2 2022 and $38,315 in Q3 2021.

The amount financed arrived amidst a rising interest-rate environment that experts explained following the latest move by the Federal Reserve.

“High prices and rising interest rates are dealing consumers a one-two punch by catapulting monthly payments into a new realm,” Edmunds executive director of insights Jessica Caldwell said in a news release.

“With new-vehicle purchases, automaker subsidies offer a bit of relief, but even those are far less generous than before. Consumers heading into the car market may be aware of high prices but also need to brace themselves for a different experience in the F&I office.”

Edmunds analysts note a small uptick in shorter loan terms in Q3, which they say is reflective of more car shoppers taking advantage of subsidized interest rates offered by automakers.

Edmunds data also showed that 9.3% of financed new-model purchases had an average contract term of 48 months or less in Q3, compared to 4.5% in Q3 2020 when low interest rates and longer contract terms were “a carrot for pandemic-weary shoppers.”

Edmunds’ director of insights Ivan Drury elaborated about that point.

“Most car shoppers tend to have tunnel vision when it comes to their monthly payments and their knee-jerk reaction is to stretch out their loan terms to make pricier purchases a bit more palatable, but that’s a huge risk to take when cars are already selling above MSRP and interest rates are so high,” Drury said. “Consumers who want to save where they can must think about the big picture when it comes to financing their car purchase.

“It might be a hard pill to swallow to agree to a much larger monthly payment, but if your ultimate goal is to save money and stay out of the red, you could save yourself thousands of dollars by taking this step — just make sure that the monthly payment you agree to is still within your means,” he added.

Quarterly New-Car Finance Data (Averages)

Quarterly Used-Car Finance Data (Averages)

Source: Edmunds