Everything you need to know about selling your car online
Below is an easy way to determine how valuable your car is.
The problem has been resolved
- Almost 20% of car buyers agree to pay car loans of more than $1,000 each month.
- Record numbers of car buyers are taking out 84-month loans to make monthly payments more affordable.
- Some dealers see different trends as leases remain popular.
Car buyers set national records in the second quarter as they chose to spend a whopping long-term loan and monthly car payments, comparable to their monthly mortgage bills.
According to second-quarter data calculated by edmunds.com, the share of new car buyers to commit to monthly payments of over $1,000 reached an all-time high of 19.3%, or nearly one in five consumers. This is up from 17.8% in the same period last year. The average monthly payment was $756, an increase of $16 from the previous year.
Edmunds reported that car buyers are taking long-term loans to achieve delicious payments. In the quarter, 22.4% of new vehicle funding was on loans for over 84 months, a new record. In the second quarter of last year, 84-month loans accounted for 17.6% of new car financing.
In Metro Detroit, Chevrolet and Ford dealers report monthly loan terms and payments respectively, are much lower than Edmunds’ national average due to the popularity of leases and employee discounts, both of which cut monthly payments. But at Gordon Chevrolet, which owns stores in Garden City and Orange Park, Florida, dealer Adam Logman said he is seeing more Florida customers increasingly opt for a 72-84-month loan.
Edmunds’ Ivan Drury said it’s easy to assume that the 25% tariffs placed on imported vehicles are liable. However, record trends are more reflective of consumers increasingly choosing the largest loan term despite stable vehicle prices.
“It’s clear that buyers are pulling some levers they can control to manage affordability, even if they undertake longer loans, raise more funds, or beat fewer money, or some of those decisions increase the total cost.”
Drury said that tariffs have not yet directly raised prices for the second quarter, but “it will not make things easier for shoppers to move forward.”
High interest rates, long loans
Edmunds data also showed that large loans are now the new normal, with the average amount of new vehicles being loaned, rising to $42,388 in the quarter.
The quarterly new car loan term was 69.8 months, with an annual rate of 7.2%, an increase in APR of 7.3% from 69 months to a year ago. The average monthly payment was $756 compared to $740 a year ago. Worse, 0% financial transactions account for 0.9% of new vehicle loans. This is the lowest share since 2004, recorded from 2.9% a year ago.
If you think there are quite a few used cars, think again. In the second quarter, the average loan length taken on a used car was 69.7 months, which is flat compared to the annual quarter. The average APR was 10.9%, down from 11.5% the previous year. However, the average monthly payment was $7 more than the previous year at $559. This is because the average loan amount rose from $28,166 to $29,080, while the average down payment fell from $4,140 to $4,092.
You might consider leasing
Edmunds said new vehicle buyers will spend less money this quarter, like second-hand car shoppers. Edmunds data showed that the average down payment for new car purchases in the quarter was $6,433 compared to the previous year’s $6,579.
While extended loan terms may make monthly payments easier, Edmunds analysts note that they can have long-term results.
“Consumers should keep in mind the risks associated with extended loans that are in the future, including increased maintenance costs and risk of getting underwater on a loan if the car was traded before it is repaid. “If the payments for the more standard 60- or 72-month loan do not fit your budget, you may consider lease.”
Yoon gives buyers time to get better finances with monthly payments, even if they don’t allow buyers to build equity on their vehicles like they do in a purchase.
Dealers say consumers are still healthy
At Village Ford, owner Jim Seavitt offers 84-month loan terms, but does not encourage customers to take it if possible. He wants to keep that rate low as about 10% of the 170 new car sales per month are 84 months of loans. Around 5% of his sales brings more than $1,000 in car payments per month, but they are usually due to SUV or F-Series pickups on luxury Ford expeditions. In June, he said he had only four sales to bring in a car payment of $1,000 a month.
Logman, the dealer principal for Gordon Chevrolet of Garden City and Gordon Chevrolet of Florida, said it’s because Detroit pays less monthly than the rest of the country because so many car buyers have leased new vehicles in Detroit and three Detroit car makers are buying cars there. However, Florida stores say monthly car payments are significantly higher, with more customers saying they are extending loan terms to reduce payments.
“We’ve historically seen 84 months of loans. Most people are looking for that 72-84 month loan period,” Logemann told Detroit Free Press, part of the USA Today network. “Part of that is lowering monthly payments. Another part is that the vehicle is much higher quality, so the customer’s ownership period could be a little longer because they are confident in the car.”
He said customers still come to the table with proper down payments. “The two big things we do in our lives are that we buy a house and a car.
If a customer owns a vehicle for a long-term loan, LogeMann said it is more important than ever for dealers to provide customers with a “top-level experience” and return for service that year.
Logemann added that despite widespread uncertainty about tariffs and the economy, both of his stores have earned strong revenue in the quarter “solid” vehicle sales and service lanes, and that “consumers are pretty healthy at this point.”
Jamie L. Larrow is a senior Autos writer covering Ford Motor Company for the Detroit Free Press. Please contact Jamie at jlareau@freepress.com. Follow her on Twitter @Jarouan. Sign up for our car newsletter. Become a subscriber.
