Edmunds spots multiple new highs among Q1 financing data

Financing a used-vehicle acquisition almost seems like a bargain when compared to new-car trends included in first-quarter data from Edmunds released on Monday.

Edmunds reported the average amount financed for a used-vehicle delivery in Q1 came in at $28,610 for 70 months with an average interest rate of 11.1%. With an average down payment clocking in at $3,999, Edmunds computed the average monthly payment to be $551.

Now for the metrics involving new models.

Edmunds said the average APR on financed new vehicles in Q1 climbed to 7%, compared to 4.4% in Q1 2022, which is the highest level Edmunds has on record since Q1 2008.

However, Edmunds analysts note that March marked the first time after 14 consecutive months of increases that the average new-vehicle APR stayed flat (at 7%), which they attribute to a moderate increase in subsidized financing by automakers.

Edmunds also noted the average monthly payment for new vehicles hit a record high of $730 in Q1 2023, compared to $656 in Q1 2022.

Furthermore, analysts determined 16.8% of consumers who financed a new vehicle in Q1 committed to a monthly payment of $1,000 or more — a new all-time high according to Edmunds — compared to 10.3% in Q1 2022 and 6.2% in Q1 2021.

The average down payment for a new vehicle climbed to a record high of $6,956 in Q1 2023, compared to $6,083 in Q1 2022.

“Since inventory levels are improving, interest rates are now topping the list of the greatest obstacles that automakers will be facing in 2023 to move metal,” Edmunds executive director of insights Jessica Caldwell said in a news release. “But with major challenges come great opportunities: Since interest rates are at the forefront of consumers’ minds, any automaker or dealer that can advertise incentives related specifically to interest rates will likely get more attention.

“This could be a powerful marketing tool that would enable sellers to tap into the significant pent-up demand that has been building over the past few years and convert that demand into actual sales,” Caldwell continued.

Edmunds analysts took a closer look at financed new vehicle purchases in Q1 and calculated the average monthly payment, amount financed, APR, down payment and total interest paid — in each case based on contract term lengths.

Q1 2023 New-Car Finance Data Broken Out by Loan Term Length (Averages)

Source: Edmunds

Edmunds experts noted that these figures highlight the stark contrast between the consumers who are able to take advantage of lower APR offers and those who can’t.

Although quarterly figures appear to reflect that the average contract term has remained static at around 70 months, Edmunds analysts say term lengths don’t tell the full story — which is that more car shoppers are being pushed to the extreme ends of the finance terms spectrum.

Edmunds pointed out that 12.3% of consumers opted for 36- or 48-month loan terms in Q1, the highest Edmunds has on record since Q4 2009, while a majority of consumers are extending contract terms out as much as possible in order to increase affordability.

“It takes money to save money in today’s market. Although more automakers are offering to subsidize auto loans with lower interest rates, the catch is that most of these offers require that consumers agree to shorter 36- or 48-month loan terms — which might put people off at first glance,” Edmunds’ director of insights Ivan Drury said.

“If you’re a qualified buyer and have the means to put more money down, whether in cash or via your trade-in, know that you have a serious advantage — you’ll be committing to a much larger amount toward the down or monthly payment, but you will save up to tens of thousands of dollars over the course of your auto loan,” Drury went on to say.

Quarterly New-Car Finance Data (Averages)

Quarterly Used-Car Finance Data(Averages)

Source: Edmunds