At the same time, financing any type of vehicle is also getting more expensive, as the Federal Reserve’s latest interest rate hike of 0.75 percentage point pushes up the cost of auto loans.
“Low-interest rates used to be one of few reprieves for car shoppers amid elevated prices and supply shortages,” Caldwell said. “But the Fed rate hikes this year are making finance incentives far costlier for automakers, and consumers are starting to feel the pinch.”
The average annual percentage rate on a new car hit 5% for the first time since the beginning of 2020, according to June data from Edmunds.
While an increase of about 1 percentage point may not seem like much, jumping to an APR of 5% from 4% could cost consumers $1,324 more in interest over the course of a $40,000, 72-month car loan, Edmunds experts said.
And still, luxury shoppers are flocking to dealerships, willing to spend more on high-end cars and the financing to go along with them.
For the first time, just over 12% of consumers who financed a new car in June committed to a monthly payment of $1,000 or more — the highest level on record — compared with 7.3% one year ago, Edmunds found.
“Although there appears to be a steady stream of affluent consumers willing to commit to car payments that look more like mortgage payments, for most consumers the new car market is growing increasingly out of reach,” Caldwell said.