Edmunds projects new records for monthly payments

Monthly payments for both used- and new-vehicle financing is projected to break records, according to data gathered and tracked by Edmunds.

Edmunds reported on Tuesday that the average monthly payment for new vehicles for the fourth quarter is expected to climb to $636, the highest level that Edmunds has on record, compared to $614 in Q3 2021 and $581 in Q4 2020.

Edmunds data also indicated that the average monthly payment for used vehicles is expected to break a record, climbing to $520 for Q4, compared to $500 in Q3 2021 and $437 in Q4 2020.

Analysts explained that the increase in average monthly payments is likely due to an influx of luxury shoppers moving away from leasing toward financing new vehicle purchases.

Edmunds data showed that new vehicle lease penetration fell to 23% in December, down from 31% in December 2019.

Edmunds said its data also showed that dealer financing increased across the board for luxury brands year over year. For example, in the fourth quarter, dealer-financed purchases made up 46% of Audi sales compared to 34% in Q4 2020, and Lexus dealer-financed purchases made up 45% in Q4 2021 compared to 26% in Q4 2020.

For a more comprehensive list of dealer-financed purchase percentages broken out by luxury automaker, see the table at the bottom of this story.

“Leasing and luxury historically have gone hand in hand, but that trend is drifting away as automakers have less reason to incentivize leasing amid inventory shortages,” Edmunds executive director of insights Jessica Caldwell said.

“Affluent luxury shoppers are likely feeling comfortable with financing their pricey purchases instead since interest rates are so low,” Caldwell continued.

Edmunds also noted that lower annual percentage rate (APR) offers are one bright spot for vehicle shoppers who might feel daunted by fewer discounts and higher prices in the current market.

“If you’re looking to finance your next car purchase, know that interest rates are on your side,” Edmunds senior manager of insights Ivan Drury said. “Make sure to shop around for your auto loan the same way you’d shop around for your vehicle.

“Automakers and dealers will do what they can to keep customers in their F&I department, which offers a bit more room for negotiation for shoppers in this seller’s market,” Drury continued. “It doesn’t hurt to ask if a dealership would be willing to beat the rate you’ve been approved for elsewhere. Some dealers might also be willing to offer a longer loan term at a comparable or marginally higher interest rate.”

Quarterly New-Car Finance Data (Averages)

Quarterly Used-Car Finance Data (Averages)

Quarterly Percentage of Dealer Financed Purchases by Luxury Automaker

Source: Edmunds