Car Buyers Are Taking out Smaller Loans, but Monthly Payments Are Still Higher
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Despite taking out smaller auto loans, car buyers are committing to even higher monthly payments.
That’s because it's more expensive to finance cars. New auto loan rates climbed to an average of 7.2% last quarter, up from 6.1% a year ago, while used rates jumped from 10.4% to 11.9%, according to a new Experian report. If you have poor credit, meanwhile, you can expect car loan rates that are much higher than average (see more on this below).
Car buyers are using a variety of strategies to adapt to an environment with painful loan rates and stubbornly expensive auto prices. They appear to be taking out shorter loans to avoid paying more interest: The average loan term was 67.9 months in the fourth quarter, down from 69.3 a year ago. Even so, the average new car payment rose to $738 in the fourth quarter, up from $720 a year ago.
