Car buyers have fewer choices when obtaining larger car loans

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Sale of used cars. Sale of used cars. (Source: Shutterstock)

In response to record high car prices, buyers took out larger loans and made larger down payments.

From the fourth quarter to the second quarter average new car prices have gone up Used car prices rose 1.5% to $ 40,656, while used car prices climbed 9.3% to $ 40,656, according to data released Thursday by Edmunds, a car buying analyst firm based in Santa Monica, California. 30,224 dollars.

Buyers are saving about 12% on new and used cars – rates that have increased over the past year.

To keep up with the spike in used car sales, they borrow more money for longer periods.

Lower interest rates helped a little. They averaged 7.9% for used cars in the second quarter, down 30 basis points from a year earlier and 20 basis points from the first quarter.

However, monthly payments for used cars in the second quarter were $ 473, up 14.8% from a year earlier and 9.5% more than in the first quarter.

chart showing that consumers are taking more car loans

Jessica Caldwell, chief analyst at Edmunds, said the market is leaning towards the rich.

“This is not a conducive environment for people on the verge of purchasing a new car,” Caldwell said. “The average loan terms are already quite long and the interest rates are relatively low on average, so the buyer really has to make up for the price difference.”

Reduced inventories and reduced discounts in the new car market are pushing more buyers into the used car market, “pushing used car prices to astronomical levels,” she said. “Car buyers are used to making deals, and often new car prices are much lower than recommended prices, so anyone who returns to the car market for the first time in a while is in for a serious sticker shock.”

The slower rise in new car prices reflects a shift in relation to higher sales of cheaper SUVs and passenger cars and fewer high-performance pickups.

“Expensive options pickups were a consumer favorite and the main culprit behind the industry average deal price hike during the pandemic, but stocks finally ran out,” Caldwell said.

Cox Automotive predicts that dealers will sell 16.5 million new cars and light trucks this year. Senior economist Charlie Chesbrough said sales in the first half were 17.1 million seasonally adjusted vehicles per year (SAAR), but they will be slower in the second half.

“Even though there is strong demand from consumers, they cannot buy what is not,” Chesbrough said. “It is difficult to estimate how long the supply shortage will last, as the problem varies greatly by product line and geography, but certainly the next few months will be indicative.”

Jonathan Smoke, chief economist at Cox Automotive, said limited supplies have allowed dealers to charge high prices and record profit margins.

“When it comes to retail car sales, the pandemic is in the mirror of the review,” Smoke said. “The dealers are mainly focused on one issue: inventory.”

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